Commons Sitting of 24 October 1994

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
Oral Answers to Questions
  SOCIAL SECURITY

    Mortgage Interest
    Mr. Illsley: To ask the Secretary of State for Social Security what proposals he has for ending payments of mortgage interest for income support claimants.
    The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans): None, but in the course of the long-term review, we are examining and encouraging discussion on all aspects of the benefit system.
    Mr. Illsley: Does not it seem a bit strange that the party and the Government who have done so much to encourage home ownership over the past 15 years now see fit to do away with mortgage interest payments—or even to reduce them—when repossessions are running at 1,000 a week? Rather than reducing the assistance available to people who are losing their jobs and who are being placed in difficulties, should not the Government be doing more to help them?
    Mr. Evans: The hon. Gentleman obviously did not listen to my answer, which was "none". The Government have very much in mind the need to maintain an effective and appropriate safety net for those who purchase their homes.
    Mr. Brazier: I welcome my hon. Friend to his well-deserved new position. Sympathy is obviously required for existing mortgage holders who find themselves in, or close to, difficulties. However, as we are the party that is committed to value for money, is not it time that we drew a line and said that, for future mortgages, the taxpayer is not willing to take on such a burden because private insurance is available? People should in future take that out at the same time as they start their mortgages.
    Mr. Evans: My hon. Friend has made a point with his customary force. The Government have in mind the importance of an appropriate safety net. Although insurance may have some part to play, it may well not be the complete answer to providing a safety net.

    Benefit Fraud
    Mr. Waterson: To ask the Secretary of State for Social Security what further measures he is proposing to combat fraudulent benefit claims.
    Mr. Dykes: To ask the Secretary of State for Social Security if he will set out his Department's objectives in pursuing fraudulent claims for social service payments.
    The Parliamentary Under-Secretary of State for Social Security (Mr. James Arbuthnot): Many measures are being developed to improve the security of the entire benefit system. They include strict checks to help discover cheats when they first try to make a false claim and more use of computers to weed out frauds already in the system. My right hon. Friend the Secretary of State for Social Security has reinforced his commitment to crack down on fraud by appointing a senior official to head a special security branch within the Benefits Agency.
    Mr. Waterson: I am grateful for that answer. I take this opportunity to give my hon. Friend a warm welcome to the Dispatch Box. Will he confirm that he has already clamped down on fraudulent claims by benefit tourists and by new age travellers? When will he do the same for payments of housing benefit to convicted prisoners and yuppies who try to avoid national insurance contributions?
    Mr. Arbuthnot: I am grateful to my hon. Friend for his kind remarks. I confirm that we have introduced an habitual residence test because it is quite wrong to allow tourists to claim benefits when they have no intention of looking for work in the United Kingdom. We are also introducing changes for new age travellers. It will be impossible for the unemployed to claim benefit unless they can prove that they are both available for, and actively seeking, work. As to prisoners on housing benefit, subject to certain conditions, single prisoners get housing benefit for up to a year for rent on empty houses. In response to genuine public concern about that being over-generous, we intend to limit the period to 13 weeks from next April. My right hon. Friend the Secretary of State for Social Security has also announced that he intends to put an end to scams involving the use of diamonds and wine to fiddle national insurance claims.
    Mr. Frank Field: I also welcome the Minister to the Dispatch Box. I hope that he takes a lot more action on that front than his colleagues have over the past 15 years. Would not the most effective way to deal with gang attacks on the benefits system be to give everyone a free giro account? Why was such a step, which would have saved taxpayers billions of pounds, not taken 15 years ago?
    Mr. Arbuthnot: For a long time, the Government have given high priority to attacking fraud, and the year-on-year savings show that that is the case. This year we have made the highest ever saving—£654 million, which is up 17 per cent. on last year's figure.

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    As regards the hon. Gentleman's other point, we are introducing an automated benefit payments system, which will probably take the form of a card. It will stop fraudsters, help taxpayers and be good for rural post offices.
    Dame Elaine Kellett-Bowman: I also welcome my hon. Friend to the Front Bench. May I ask him to commend the fraud squad at my local DSS office, which covers Lancaster and Morecambe? Although it is a small squad, it is extremely efficient and has saved a substantial sum since it was set up, all of which can be devoted to helping those who are in real need.
    Mr. Arbuthnot: My hon. Friend is right, and I certainly commend her local fraud squad. Everyone in the system must remember that every pound that is wrongly claimed in benefit is a pound that is not available to those in genuine need. I congratulate my hon. Friend on bringing that to our attention.
    Mr. Skinner: Is the Minister aware that, a couple of years ago, a House of Commons Committee found that more than £200 million was lost to the Exchequer as a result of firms not passing on the tax and insurance that they had taken out of the pockets of many low-paid employees? There have been hardly any prosecutions as a result of the loss of that enormous amount of money. What steps are the Government now taking to recover that?
    Mr. Arbuthnot: I am grateful to the hon. Gentleman for what I take as his support for the Government's strategy on preventing fraud. We have a strong strategy, which depends on prevention, detection and deterrence, and we are now concentrating on the prevention of fraud. We shall introduce new electronic measures, more home visits and computer data matching and automated benefit payments systems. Those measures will ensure that the social security system will not be seen as a soft touch, as it has been in the past.

    Benefits Delivery
    Dr. Spink: To ask the Secretary of State for Social Security what are his objectives for the delivery of social security benefits; and what new initiatives he is considering to ensure sufficient delivery with reduced opportunity for fraud.
    The Secretary of State for Social Security (Mr. Peter Lilley): I have three clear aims: to ensure that pensioners and others can choose to be paid via the Post Office, to reduce administrative costs and to crack down on fraud. That is why in May I announced our intention to automate the process by which benefits are delivered at post office counters. That is good news for customers, good news for taxpayers and good news for post offices.
    Dr. Spink: I thank my right hon. Friend for that answer. Will he confirm that he intends to involve the private sector in the automation of benefits delivery and that that improvement will enable those changes to be made more cost-effectively, more efficiently and more quickly and will be welcomed by sub-post offices?
    Mr. Lilley: I can confirm that we shall seek to involve the private sector in the introduction of the system to computerise the 20,000 post offices. It will
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    be an immense operation. We have already invited expressions of interest, and more than 90 firms have expressed an interest in taking part in the consortia. Post Office Counters is now trying to narrow the number of those who will be invited to tender. The result will be that we shall be able to involve private sector finance and private sector expertise to get fraud savings more quickly, more efficiently and better.
    Ms Lynne: Is the Secretary of State aware that the merging of income support and unemployment benefit under the job seeker's allowance will discriminate unfairly against 18 to 24-year-olds who have been in previous employment? They will have £9.55 less than they have at the moment. Is not that unfair?
    Mr. Lilley: I am not quite sure what that has to do with the delivery of benefits through post offices, but in the spirit in which the hon. Lady asked the question, let me say that I shall be making a statement immediately after Question Time about the job seeker's allowance. We shall bring together income support and the contributory unemployment benefit in a single structure of benefits. We shall naturally have a single structure of rates, including the lower rate for the under-25s, as is long established for those who are on income support. That is right and it reflects the lower level of financial expectations, and often of costs, of younger people and the shorter period during which they have been paying into the system.
    Mr. Jenkin: Will my right hon. Friend join me in welcoming the Home Secretary's announcement on a voluntary identity card system in the United Kingdom? Would not a voluntary benefit claimant's card, for use in sub-post offices and post offices, be good news not only for the Government, as it would save taxpayers' money in relation to fraud, but for sub-post offices, which would then provide a secure route for the delivery of benefits?
    Mr. Lilley: Yes, the proposals to which I have just referred will probably result in the introduction of a payments card for those whose benefits are paid through post offices. It would be voluntary in the sense that if they wish to have benefits paid through the banks, they will have whatever means the banks require to identify and ensure secure payment. That sensible approach will benefit pensioners and others, and will save the taxpayer money, as about £150 million-worth of fraud should be eliminated. It is right that my right hon. and learned Friend the Home Secretary should approach cautiously the issue of a national identity card, as he is through the discussion of a Green Paper and consideration of whether there is a prospect of widening the use of the benefit card. However, that is very different from a compulsory identity card, which would not be the same as my proposal.

    Child Support Act
    Mr. Miller: To ask the Secretary of State for Social Security what proposals he has to change the provisions of the Child Support Act 1991.
    The Parliamentary Under-Secretary of State for Social Security (Mr. Alistair Burt): I have said on

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    many occasions that the Government are keeping the policy under close review and that continues to be the case. We have no specific proposals at this stage.
    Mr. Miller: I am sure that the Minister will acknowledge that I have written to him in support of fathers and mothers affected by the inadequacies of the Child Support Act. Will he confirm that he and his officials met many groups over the summer and that all of them pressed the case for sweeping changes to the Act? Will he now give a commitment that such changes will be introduced as a matter of urgency, in the interests of all parts of families?
    Mr. Burt: I and colleagues met several groups over the summer. However, one of the problems is that people's interests in the matter are not necessarily the same. The reforms that some people want may not be wanted by others. As I said at the start of my reply, we keep the policy under review. The hon. Gentleman will be aware that the Select Committee on Social Security is considering the matter at the moment. It would be presumptuous of us to comment on policy direction before the Select Committee has reported.
    Mrs. Roe: Does my hon. Friend agree that top priority must be given to sorting out the operation of the Child Support Agency? Does he also agree that policy change inevitably leads to disruption and that such changes should be kept to a minimum?
    Mr. Burt: My hon. Friend has made two significant points. First, with regard to the agency's administration, it is common currency in the House that the agency's first year was not a good one, and that was acknowledged by the agency in its report. During the summer, we took steps to implement administration reforms to ensure that more people receive more maintenance and that all cases are dealt with better. There is already some fruit from that. From April this year, about 300,000 cases have been cleared, compared with just over 360,000 for the whole of last year. We are endeavouring to ensure that administration is better. We know just how much that means to all hon. Members.
    Secondly, I agree that policy changes cause disruption. Therefore, they are not easy matters to bandy about. All policy changes must be thought through extremely carefully.
    Mr. Barnes: Why is the agency's operation entirely inept? Why is the principle upon which the agency is operating entirely heartless and one which requires considerable transformation? Will not it be like the operation of the poll tax in respect of which there were transitional demands and transitional alterations until finally it was transformed into something else? The operation needs to be transformed.
    Mr. Burt: No. In answer to the hon. Gentleman's major point, I do not think that it is wholly inept. I certainly do not think that the principle behind it is heartless. That principle has been endorsed by the House on several occasions since the Child Support Act was passed. We all want to ensure that the principles
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    behind child support are delivered properly. That is our determination and I believed that it was the determination of the whole House.
    Dr. Michael Clark: Is my hon. Friend aware that many people are under the misapprehension that the CSA chases only those absent parents—generally fathers—who have paid money in the past? When my hon. Friend deliberates on the changes, will he bear that point in mind? What proportion of cases now involve chasing fathers who have paid nothing in the past? How will that change in future?
    Mr. Burt: The misapprehension that my hon. Friend speaks of is appropriately raised. It has always been considered that the agency would look for those who had not previously paid maintenance as well as for some of those who had previously paid maintenance but whose maintenance payments needed to be raised. Of the 210,000 cases taken on since April this year, more than 77 per cent. involved those who have not regularly paid maintenance. We have also been pursuing 45,000 absent parents who had disappeared. I remind the House that, under the previous system, there was no mechanism for finding those absent parents, and we have been successful in 80 per cent. of cases. That is a solid gain for the children involved and for the mothers who have been looking for those fathers.
    Mr. Ingram: I congratulate the Minister on keeping his job in a very changed Department. [Interruption.] Perhaps commiseration is much more appropriate. Will the Minister comment on reports in Sunday's edition of The Observer that the Chief Secretary to the Treasury has privately told Conservative members of the Social Security Select Committee to oppose fundamental changes to the Child Support Act? If the Government do not favour taking clean-break settlements into account, do not want a disregard for parents on benefit and do not favour changing the existing formula for calculating maintenance, what changes do they favour, or would that question be more appropriately put to the Treasury, which seems to be running the Department?
    Mr. Burt: I dealt with policy in my first answer, when I said that we continue to keep the policy under review and that we must consider carefully what representations are made to us. As the hon. Gentleman will appreciate, newspaper comment on this topic abounds. If the Government were to take notice of every report, they would do nothing else.
    Mr. Cormack: Does my hon. Friend accept that I have brought cases to his notice which show that some conscientious fathers are now required to pay wholly unrealistic amounts which bear no relation to either their obligations or their means?
    Mr. Burt: It is precisely because of the depth of concern expressed by my hon. Friends that we are looking carefully at the matter. The formula, which was put into place with considerable support in the House, is causing more maintenance to be paid, and that has been uncomfortable on some occasions. It is because of those cases that have appeared to be particularly hard that the Government are taking the time that they have—indeed, that is why the Select Committee has taken the time that it has—to make sure that they see the way forward clearly and carefully.

    Child Poverty
    Dr. Lynne Jones: To ask the Secretary of State for Social Security what measures he is taking to alleviate child poverty.
    Mr. Burt: Extra help worth more than £1 billion in the current year has been directed through the social security system toward low-income families with children. The new child care disregard will benefit about 150,000 families, and through that and other improvements to family credit we are helping more than 500,000 families to be better off in work.
    Dr. Jones: Does the Minister realise that while Tory Members have been dining at the Ritz, the number of children growing up in poverty has been increasing dramatically, with one in four now growing up in families for whom even an 1876 workhouse diet is too expensive? For the sake of those children and for the rest of us who are increasingly affected by divisions in society, is not it time that the Government got to grips with the magnitude of the problem?
    Mr. Burt: I am sure that the House is aware that, since 1979, average income has risen by 36 per cent. It is common sense to understand that unemployment levels over the years have affected the figures for those on the lowest incomes—we know that. Therefore, the best way for the Government to proceed is through increasing opportunities for employment. That is why our unemployment rate is going down in comparison with the rate in the European Community, where it is going up. That is also why the unemployed have been protected. The hon. Lady might care to know that a couple on unemployment benefit with two children are now 24 per cent. better off in real terms than they would have been under the equivalent benefit under the previous Labour Government. If the hon. Lady supports the idea of a minimum wage, she should be aware that it is calculated to make poor families still poorer as fathers lose their jobs.
    Mr. Peter Bottomley: Does my hon. Friend accept that the child additions for those on income support and the new arrangements to help those caring for children to get back to work will be welcomed by hon. Members on both sides of the House? Will he continue to ensure that the House is aware of the figures which illustrate that those who are, sadly, out of work or dependent on income benefit are sharing in the increased standard of living? Will he ensure that our policies are directed not only at getting more people back to work but at continuing to protect those at the bottom of the heap?
    Mr. Burt: Yes, my hon. Friend makes a valid point. As I said a moment ago, the benefit system has tried to protect those who still find themselves unemployed. I gave the comparison of unemployment benefit rates for a couple with two children which shows how that is done. The crucial point is to help people back into work. Other parties do not have a monopoly on that particular aspect of social welfare. For some years, the Government have seen the welfare system as an opportunity to move people back into work—we will hear more about that today—but the family credit system has been uniquely successful in ensuring that
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    that happens. That is contributing in no small way to the improvement in living conditions for many low-paid families.

    Invalidity Benefit
    Mrs. Roche: To ask the Secretary of State for Social Security if he will make a statement on tests for invalidity benefit.
    The Minister for Social Security and Disabled People (Mr. William Hague): All benefits for people who are incapable of work are subject to medical control procedures, which may include a medical examination by a doctor from the Benefits Agency medical services for a second opinion about a person's capacity for work.
    Mrs. Roche: Given that the report on the new tests was published more than a month late, and that there were considerable delays in issuing copies of the report to members of the public, will the Minister stick to his departmental pledge that there will be a three-month consultation period so that members of the public, including many of my constituents, who have grave concerns about the new tests can make their fears known to the Government?
    Mr. Hague: It is important to ensure that the tests are soundly based, and that is why the time was taken to consider the work of the panel of 80 experts which led to the document mentioned by the hon. Lady. That has meant that the time for consultation is compressed. Obviously, it is also important that the tests come into force at the time next year that the Act states. That means that the consultation period is shorter than intended, but I hope that all who are interested will take the time available to contribute to the document and to send their views to the Government.
    Mr. John Marshall: I congratulate my hon. Friend on his promotion. Can he tell the House the trend in the number of recipients of invalidity benefit over the past 10 years, at a time of improved health standards? Does not that increase lead one to suspect that some people who have been getting the benefit should not have been getting it?
    Mr. Hague: My hon. Friend refers to an important point. The number of people on invalidity benefit has increased from about 700,000 to more than 1.5 million. The Government's reforms are intended to ensure that incapacity benefit goes to people who are genuinely incapable of work. The social security system should be geared to looking after people in that position, not to people for whom the benefit was not originally intended.
    Mr. Bradley: I welcome the Minister to his new range of responsibilities, and I welcome all the extra Ministers whom the Government have put up against the quality, if not the quantity, of the Opposition Front Bench. Can the Minister confirm that, since he belatedly published the medical test, the Government's original estimate that there will be an extra 200,000 people claiming unemployment benefit but not eligible for the new incapacity benefit is still the case? What will be the impact of the new job seeker's allowance on those

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    people who are in receipt of invalidity benefit but who will fail the new medical test and be expected to go on to other benefits?
    Mr. Hague: Yes, I can confirm that our estimates of the numbers involved are the same as before; we have had no reason to change them. Obviously, for people who are not eligible for incapacity benefit, the full range of other benefits of the social security system are available, as, indeed, they are to everyone else.

    Occupational Pension Schemes
    Mr. Peter Ainsworth: To ask the Secretary of State for Social Security whether he proposes to change the system of regulation for occupational pension schemes.
    Mr. Arbuthnot: Yes. Our proposals are set out in the White Paper "Security, Equality, Choice: the Future for Pensions" and we have undertaken to bring forward legislation to implement them at the first available opportunity.
    Mr. Ainsworth: I welcome my hon. Friend to his new responsibilities and also welcome his proposals, which will bring to millions of employees a sense of security about their retirement and encourage employers to continue to provide occupational pensions. Does my hon. Friend share my concern at proposals which would be detrimental to the interests of those on occupational pensions such as the proposals made by the so-called Commission on Social Justice?
    Mr. Arbuthnot: I am grateful to my hon. Friend for his kind remarks. He is right to welcome our proposals in the White Paper. A recent survey by Alexander Clay and Partners showed that almost nine out of 10 companies welcomed our White Paper and the key proposals in it. They felt that we had struck the right balance between security of pensions for employees and keeping costs to the minimum for employers. As regards the Commission on Social Justice, I have not yet read its proposals in full and I need to study them with care. My initial reaction to what I have seen of them is one of disappointment as they might impose considerable costs on top of the national insurance contributions for which employers are already liable and which we opted out of the social chapter specifically to avoid. I should like to know what the Labour party thinks would be the costs of the proposals. Unless it faces up to that, it can never be taken as a serious party.
    Mr. Rooney: Will the Minister confirm that in his world of a deregulated labour market with constant changes of employment and patterns of unemployment and part-time work, the only suitable pension for workers is the state earnings-related pension scheme?
    Mr. Arbuthnot: The Government aim to maximise the choice and flexibility in the provision of pensions. We recognise that there is a definite need for additional pensions over and above the state retirement pension, but the state retirement pension will remain the sound foundation of our pensions policy.
    Mr. Hawkins: I join in welcoming my hon. Friend to the Front Bench. I also welcome the Government's proposals for member-nominated trustees of occupational pension schemes. Does my hon. Friend agree that
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    member-nominated trustees with time off for training and information for members will greatly safeguard the interests of members of occupational pension schemes?
    Mr. Arbuthnot: Yes, I agree. It is right that members of schemes should have the right to nominate a third of the trustees as that will give them a say in the running and safeguarding of the assets of their pension fund. As my hon. Friend says, training is vital. That is why we intend to make employers give employee trustees paid time off. We do not think that it is right to prescribe that for all trustees, but we believe that it is extremely important.

    Social Fund
    Mr. Pike: To ask the Secretary of State for Social Security what change would result in the administration costs of the social fund if loans were to be ended and the resources used for grants only.
    Mr. Roger Evans: It is impossible to make a useful comparison between the present system of grants and loans with the hon. Gentleman's hypothetical grants system. But if grants were to replace loans entirely, for the same amount of money far fewer people would be helped.
    Mr. Pike: Does the Minister accept that that answer must be nonsense when in a previous answer the Under-Secretary of State said that more than 45 per cent. of the social fund was used in administrative costs and that a large part of that was due to the administration cost of giving loans? Is not the system targeted to help the poorest section of the community? Is it not nonsense to try to administer a scheme with all the costs involved and to ask people to pay back loans when they cannot afford to pay them back in any case?
    Mr. Evans: The answer is firmly no. In fact, people pay back the loans. The recovery level is very high indeed. The hon. Gentleman has not appreciated the force of the point that for £43 million net cost, total loans of £255 million in total are currently advanced. What might be described as the multiplier effect of giving loans increases the amount of help given fivefold. Any system that is designed to be attuned to specific needs and responsibilities is bound to be more expensive to administer.
    Mr. Hendry: Will my hon. Friend confirm that, for a total outlay of £280 million over the life of the fund, it has been possible to offer loans of £1.2 billion? Does that not show the benefits of recycling money in that way?
    Mr. Evans: I am grateful to my hon. Friend. He has cast the figures that I gave a moment ago over the period since the scheme was introduced and they point my previous reply. By making a loans system operate in the way that we have done, we have vastly increased the amount of help given.

    Benefits Payments
    Mr. Whittingdale: To ask the Secretary of State for Social Security what is his policy in respect of the automation of benefits payments at post offices.
    Mr. Lilley: I intend to move as rapidly as possible to an automated system for paying benefit at post offices. That will reduce costs for taxpayers, be more secure for customers and guarantee the future of post offices.
    Mr. Whittingdale: Does my right hon. Friend agree that the plans that he has announced represent a massive vote of confidence in the future of the sub-post office network and give the lie to suggestions that that network is under threat? Does he further agree that the increased opportunities available to sub-post offices as a result of those plans will allow them to win new business, thus ensuring their continued survival?
    Mr. Lilley: My hon. Friend is right on both counts. When I announced the proposals to the National Federation of Sub-Postmasters, it especially welcomed the fact that our decision to computerise post offices was the clearest possible commitment that we could give that we would continue to deliver benefits through post offices for the foreseeable future. Once that network is installed, it will open up to sub-post offices the opportunity to undertake other business through the computer system, such as the payment of electricity and gas bills, or any other business that they might be able to secure which is not possible at present. It opens up a rosy future for sub-post offices.
    Mr. Hain: Does the Secretary of State accept that the majority of sub-postmasters, while welcoming the automation of benefit payments as I do, believe that post office privatisation will threaten rural sub-post offices and small post offices and that the social security claimants whom he is seeking to help by automation will find their local post offices being closed by the thousand? Why do not the Government abandon their crazy proposal for post office privatisation?
    Mr. Lilley: No, they mostly realise that that sort of propaganda is the sheerest nonsense. Sub-post offices are private enterprises and sub-postmasters know the benefits of private enterprise. We want to reinforce their ability to provide excellent service to their customers. That is why we are considering the proposals laid out in the Green Paper. Whatever happens, the future of sub-post offices is secure as a result of the decisions that I announced.

    Pensions Fraud
    Mr. Spring: To ask the Secretary of State for Social Security what measures he will take to combat fraud in occupational pensions.
    Mr. Arbuthnot: The great majority of schemes are well run. We will, therefore, impose the minimum burden on schemes and employers consistent with providing adequate security. We propose a clear framework of statutory obligations on employers, trustees and professionals, backed by a powerful regulator who will focus on schemes with problems.
    Mr. Spring: Will my hon. Friend confirm that about 20 million people in the United Kingdom have rights to an occupational scheme and that that is about a quarter of
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    all personal wealth in Britain or some £500 billion, which is a greater sum than in all the other countries of the European Union put together?
    Mr. Arbuthnot: I will indeed confirm that. Our pension policy is the envy of Europe. We have given millions of people the right to build up funds for their retirement. Our proposals will be very good for pensioners and for the future economy of this country.
    Mr. Flynn: Do the Government accept that the major fraud in occupational pensions involved the 500,000 people who were persuaded against their financial interests to leave occupational pensions and go into personal pensions? Will the Government accept their debt in that? Will the hon. Gentleman explain why, while the Prime Minister is promising to double the standard of living in the next 25 years, he is also promising to halve the value of the state pension in the same period?
    Mr. Arbuthnot: Dealing backwards with that rather backwards question, the Government have always promised that the state retirement pension will be uprated in line with prices. That is a promise that we have kept and will keep.
    As regards the mis-selling of personal pensions, an announcement is expected shortly and the hon. Gentleman should curb his impatience. The Government have made it clear that we expect the Securities and Investments Board to ensure that there is a full investigation of any mis-selling, and that anybody who has suffered a loss through mis-selling should have redress.
    As regards pensioners' incomes, pensioners in this country have had their incomes increased on average by 50 per cent. in real terms since 1979. That is a higher increase than the rest of the population. The Government have been able to give £1.2 billion since 1988 to those without other earnings who have not had those increases. Pensioners are doing extremely well.

    Benefit Fraud
    Mr. Luff: To ask the Secretary of State for Social Security what plans he has to reduce fraud involving order books and giros.
    Mr. Lilley: In addition to the measures to replace order books and girocheques which I announced earlier, we plan to improve security in advance of this by the electronic stop notice system which has been successfully tested in parts of London and is soon to be extended. The trial reward scheme for post office staff has also been extended, following the excellent results achieved in Birmingham.
    Mr. Luff: Will my right hon. Friend confirm that there has been a huge increase in the amount of fraud that has been stopped by the Benefits Agency in terms of both order books and giros? Is not the reason why sub-postmasters in Worcestershire have given such a warm welcome to his plans that they realise that the plans will not only help to contain fraud but will guarantee the future of their own sub-post offices?
    Mr. Lilley: Yes, indeed. The plan has been particularly warmly welcomed in south Worcestershire, and elsewhere in the country. Sub-postmasters are aware of the level of fraud and abuse of the archaic order book system, and they are anxious to see the move to automated payment

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    in the interests of the wider community, as well as their own self-interest. The system will be more secure for them and for pensioners and it will be less open to fraud and abuse.

  HOUSE OF COMMONS

    National Audit Office
    Mr. Ian Bruce: To ask the Chairman of the Public Accounts Commission if he will make a statement on the National Audit Office expenditure on value for money inquiries relating to capital spending on buildings.
    Mr. Robert Sheldon (on behalf of the Public Accounts Commission): In the absence of the right hon. Member for Horsham (Sir P. Hordern), who is away on a parliamentary delegation, I have been asked to reply.
    The Comptroller and Auditor General selects topics for investigation based on a review of all Government spending and the risk to value for money. Where those reviews identify the need to examine the capital spending on buildings, the Comptroller and Auditor General will include studies in his programme. The National Audit Office has published three reports on capital projects: the benefits centre project, the prison building project and the Trident works programme. All were published in July this year.
    Mr. Bruce: I thank the right hon. Gentleman for that reply. Will the Public Accounts Commission look further, particularly at defence office block building and the enormous overruns which have occurred on so many projects such as the MOD headquarters in Whitehall?
    Mr. Sheldon: The hon. Gentleman will know that that is a matter for the Public Accounts Committee, but the Committee does have the power to ask the Comptroller and Auditor General to examine certain projects and to come to a conclusion as to which will be the subject for examination. I shall pass the hon. Gentleman's message to the Chairman of the Public Accounts Committee.
    Mrs. Dunwoody: I warmly welcome my right hon. Friend to his new role and I hope that it will presage an unprecedented case of getting accurate answers to questions in the Chamber. Will he extend the role of the National Audit Office to look at the vast amounts of taxpayers' money being thrown away on unnecessary changes to Norman Shaw North, where a listed building is being changed irrevocably in a way which has not been consulted about and which can only damage both the fabric and the use of the House of Commons?
    Mr. Sheldon: As I said in reply to an earlier question, that is a matter for the Public Accounts Committee, but I shall draw my hon. Friend's remarks to the attention of the Chairman of the Public Accounts Committee.
    Mr. John Marshall: To ask the Chairman of the Public Accounts Commission how many staff are employed by the National Audit Office; and how many are qualified accountants.
    Mr. Sheldon: I have been asked to reply. As at 30 September this year the National Audit Office employed
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    768 staff. Of these, 308 are qualified accountants and a further 124 staff are undertaking professional accountancy training.
    Mr. Marshall: I welcome the right hon. Gentleman to his temporary position. Does he believe that the number of qualified accountants employed is adequate?
    Mr. Sheldon: The staff are doing very well, in fact. Not only are the accountants taking the Chartered Institute of Public Finance and Accountancy qualifications, but they are becoming chartered accountants. That means that they are able to deal with Government Departments in the same way as the leading accountancy firms in this city are able to handle such matters. That gives the NAO accountants a much greater status and standing, to the benefit of the public administration.
    Mr. Winnick: Would it be possible for the NAO to employ sufficient accountants and to have the authority to look into cases where Members of Parliament receive payments from outside sources, the money involved, the services provided and, for example, how much money is given for putting down parliamentary questions? In the absence of any other form of regulation, would it not be desirable for the NAO to have such authority?
    Mr. Sheldon: As my hon. Friend says, the NAO does not have that kind of power and it would rest upon the House to give it that power, which I think might be rather difficult to achieve.

    Visitors (Refreshments)
    Mr. Hain: To ask the Chairman of the Finance and Services Committee what financial provision will be made for the provision of refreshment facilities for visitors to the House.
    Mr. Paul Channon (Chairman of the Finance and Services Committee): Following the approval by the House of the Catering Committee's report on refreshment provision for Line of Route visitors, the amount of financial provision for a visitors centre will be for decision by the Finance and Services Committee and the House of Commons Commission.
    Mr. Hain: Is it not an insult to coachloads of visitors, who have often got up at dawn to get here, that they cannot even get a cup of tea in the House? As Westminster Hall is some kind of mausoleum at the moment, why cannot it be turned into an open area with tables and chairs where people can get a cup of tea and a snack? In that way the House would present a warm and friendly reception to visitors instead of a stiff and snotty one.
    Mr. Channon: I know that the hon. Member has been pursuing this case for many years and I pay tribute to him for that. He will recognise that the Catering Committee has recommended that the Westminster Hall cafeteria should be converted into a visitor centre. When that is achieved it will meet a great many of the points made by the hon. Member. That cannot be done at once, of course, because 400 people already use that cafeteria and they must be given somewhere else to eat. We cannot let down the staff and policemen of the House by not providing somewhere else for them to eat.

    Child Care Facilities
    Dr. Lynne Jones: To ask the right hon. Member for Berwick-upon-Tweed, as representing the House of Commons Commission what progress has been made in the provision of child care facilities in the Palace of Westminster.
    Mr. A. J. Beith (on behalf of the House of Commons Commission): The Commission has arranged for a survey of potential demand for child care provision to be made available in the Vote Office. The Commission wishes to hear the views of Members and I understand that consideration is now being given to the timing of a debate on the matter.
    Dr. Jones: I thank the right hon. Gentleman for allowing the publication of that report, which clearly shows that there is a demand for affordable child care facilities. I hope that, following the debate, progress will be made as quickly as possible. When I first came to this place, my youngest son was only two years old. Now he is nearly five. What is holding matters up? If the answer is finance, perhaps we could consider reducing subsidies to the bars so that money can be made available for this very important facility.
    Mr. Beith: The normal way in which new or extended services are provided in the House is when the relevant Committee puts forward a proposal and the Finance and Services Committee and then the Commission consider whether it can be financed. That route is not being followed in this instance because the relevant Committee did not agree to the provision of such a service. The matter will therefore be debated in the House and the Commission will consider what to do following that debate.
    Mr. Dykes: Does the right hon. Gentleman agree that we should improve facilities urgently for the long-suffering wives and husbands of Members of Parliament?
    Mr. Beith: The hon. Gentleman has not made any specific suggestions, but if he has some I hope that he will put them to the relevant service Committees of the House.

    Minimum Wage
    Mr. Enright: To ask the right hon. Member for Berwick-upon-Tweed, as representing the House of Commons Commission what consideration has been given to a minimum wage for House employees.
    Mr. Beith: The House of Commons (Administration) Act 1978 requires the House of Commons Commission to ensure that the complementing, grading and pay of staff in the House Departments are kept broadly in line with those in the home civil service. For most staff, the rates of pay are the same as those of the equivalent grades in the civil service. Where variations have been introduced, they have been achieved through negotiations with the appropriate recognised trade unions. No consideration has been given to a minimum wage for House employees.
    Mr. Enright: Is it not scandalous that no consideration has been given to this issue when people who serve us and work on an extremely low wage are hard put to it to live in London, which they are bound to do by the very
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    nature of their work? I therefore urge the right hon. Gentleman and the Commission to reconsider this issue and to consider carefully what is a fair and just wage for our employees.
    Mr. Beith: The lowest rates of pay for full-time employment in the House are above any of the minimum wage suggestions that I heard put forward at recent party conferences.
    Mr. Matthew Banks: Does the right hon. Gentleman agree that it would be unwise to introduce a policy that is likely to put some members of staff out of work?
    Mr. Beith: My earlier answer makes it clear that that would not happen. Rates of pay in the House are, by statute, linked to civil service grades, so we could not introduce a different method of determining pay without changing the statutory basis on which we do it.

    Banqueting Rooms
    Mr. Tony Banks: To ask the Chairman of the Finance and Services Committee what financial contribution is expected in the current and next financial year from the use of banqueting rooms by outside organisations; what account is taken of this income in the overall financial planning of expenditure on the House; and if he will make a statement.
    Mr. Channon: In 1993-94, banqueting contributed a net profit of some £200,000 to the Refreshment Department trading fund. In that year, £190,000 was transferred from the fund to the House of Commons administration vote and a further £530,000 was contributed from the fund's accumulated surplus to the works vote. It is too soon to forecast those sums that are to be similarly transferred in the current and coming financial years to offset part of the cost of the Refreshment Department's agreed programme of modernisation.
    Mr. Banks: Perhaps we should charge somewhat more for the use of those facilities. Are not some 80 per cent. of all the bookings of private banqueting rooms made by Conservative Members, often on behalf of outside companies? There are examples of Conservative Members using those facilities to raise money for the Conservative party. Why are we no longer allowed to ask the party affiliation of those who book rooms, and why are we not told which organisations benefit? Is that not a further example of sleaze and the fact that the Tory party does not want to give us that information because it will embarrass it?
    Mr. Channon: Whatever the rights and wrongs of the hon. Gentleman's allegations and assertions, I am glad to tell him that that matter is the responsibility not of the Finance and Services Committee but of the Catering Committee. I hope that he will address his remarks to the Chairman of the Catering Committee and his colleagues so that they may consider them.

  SOCIAL SECURITY

    Identity Cards
    Mr. Clifton-Brown: To ask the Secretary of State for Social Security whether he will consider introducing a personal identity card as one of the means to reduce fraud.
    Mr. Lilley: I propose to replace payment by order book and girocheque with a benefit payment card for customers who collect benefit at post offices. This should largely eliminate theft, forgery and fraudulent encashment of instruments of payment. However, most social security fraud arises from false representation of circumstances rather than false identity.
    Mr. Clifton-Brown: Will not my right hon. Friend's earlier answer about automation and payment of benefit at sub-post offices be welcomed by sub-postmasters? His earlier announcement presaged the fact that he might introduce a social security benefits card. Will its introduction be coupled with a consultative paper to be issued by the Home Secretary and its results taken into account when the benefit card is issued? Will not any measure that reduces social security benefit fraud be welcomed?
    Mr. Lilley: I am grateful to my hon. Friend for welcoming those proposals. I shall proceed with all speed in introducing a more secure method, probably involving a benefit payments card. That will not depend on the outcome of my right hon. and learned Friend the Home Secretary's discussions about the possible wider development of a voluntary identity card, although the proposals could be linked if that proved fruitful as a result of those consultations.
    Mr. Bennett: How much does the Secretary of State expect the manufacturers of those cards to earn, and how much are they likely to pay consultants to try to get the contract? Is there not scope for increased crime as a result of such cards, given that people in most cities can find opportunities to buy forged passports, car discs and driving licences? Will not the manufacture of the identity cards simply create a new form of crime?
    Mr. Lilley: No, that is twaddle. The present system of payment through order books is one of the most archaic and unsecure systems of transmitting money known to man. It is sensible to update it and we are looking for methods that will be more secure. We shall seek competition to keep the costs of that system down, but the system itself will save not merely large sums of money that are presently wasted through fraud and abuse but up to £60 million a year in administrative costs. That must be good for the taxpayer and I should have thought that it would be welcomed by a modern Labour party, were not so many representatives of the old Labour party still around.
    Mr. Dykes: I warmly support the identity card proposal made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown). In view of his 1993 Conservative party conference speech, is the Secretary of
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    State now satisfied that no immigrants are fraudulently claiming social security benefits from United Kingdom agencies?
    Mr. Lilley: I am not sure that I specifically discussed immigration in my 1993 conference speech, or in any other. However, following that speech I introduced a residence test for people coming from the European Community who claim benefits, thereby putting us on a par with other countries in the Community. I know that that will please my hon. Friend the Member for Harrow, East (Mr. Dykes). It will mean that we are no longer unique in handing out benefits to people who have not made a contribution to this country.
    As for those people who come to this country from outside the Community on the express understanding that they will not be a burden on the public purse, I also introduced measures to prevent the payment of income support and housing benefit to them, which had previously been possible through a loophole, so we have clamped down on them as well.

  HOUSE OF COMMONS

    Sitting Hours
    Mr. Ian Bruce: To ask the Lord President of the Council what plans he has to implement changes to the sitting hours of the House.
    The Lord President of the Council and Leader of the House of Commons (Mr. Tony Newton): As the hon. Member for Newcastle upon Tyne, East (Mr. Brown) and I told the House last Thursday, we have had further constructive discussions during the summer recess. In the light of those, I hope shortly to have an opportunity to discuss matters with the hon. Member for Dewsbury (Mrs. Taylor), the shadow Leader of the House, to whom I offer my congratulations on her assumption of that position.
    Mr. Bruce: I am sure that the Leader of the House is as tired of answering this question from me as I am tired of asking it. I wonder whether the hon. Lady has given him any sign whether, like her predecessor, the right hon. Member for Derby, South (Mrs. Beckett), she will take two years to be persuaded that progress should be made.
    Mr. Newton: My hon. Friend will understand if I concentrate on repeating that I have had some very constructive conversations with the hon. Member for Newcastle upon Tyne, East. I have no reason to suppose that the hon. Lady will be any less constructive, but I suspect that she has hardly had time to catch her breath since her appointment last week and, if she has, I have not.
    Mrs. Ann Taylor: Opposition Members want Parliament to work more efficiently, but also more effectively, and we shall co-operate fully to those ends. Does the Leader of the House agree, however, that in doing so we must be mindful of the need to improve accountability, especially by allowing Parliament to scrutinise more closely the activities of those quangos which are causing so much public alarm at present?
    Mr. Newton: I think that the hon. Lady, knows that her supplementary question is somewhat wide of the

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    subject matter of the Jopling report, but let us hope that whatever we are able to agree will enable Parliament to do all the things that it wishes to do as effectively as it would wish to do them.

    Parliamentary Questions
    Mr. Harry Greenway: To ask the Lord President of the Council what plans he has to limit the number of oral and written parliamentary questions an hon. Member may ask; and if he will make a statement.
    Mr. Newton: I have no plans to recommend any changes to the existing arrangements. If my hon. Friend wishes to make proposals, he might wish in the first instance to express his thoughts to my right hon. Friend the Member for Honiton (Sir Peter Emery), the Chairman of the Procedure Committee.
    Mr. Greenway: Does my right hon. Friend agree that Question Time is a uniquely British democratic institution? Will he undertake to safeguard its adversarial nature against any pressures to reduce, terminate or tame it by the Leader of the Opposition or anyone else?
    Mr. Newton: I certainly have no personal or ministerial plans to reduce, terminate or tame it, although my hon. Friend must be aware that the Procedure Committee, following many observations from various parts of the House, is currently considering the subject of Prime Minister's questions.
    Mr. Robert Hughes: As early-day motions now have to contain the letter "R" beside the principal proposer, will the Leader of the House propose that those who
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    table questions for Question Time should have the letters "FR" put after their numbers, meaning "fee received", and how much they get paid for them?
    Mr. Newton: Ingenious though the hon. Gentleman's question is—I foresaw, if not precisely that question, that some effort might be made to introduce currently controversial matters—I had better fall back on the observation that I am Chairman of the Select Committee on Privileges.

    Sittings of the House
    Mr. Simon Hughes: To ask the Lord President of the Council when the recommendations of the Select Committee on the sittings of the House will be implemented.
    Mr. Newton: I refer the hon. Gentleman to the answer that I have just given to my hon. Friend the Member for South Dorset (Mr. Bruce).
    Mr. Hughes: The House will understand the position of the right hon. Gentleman and of his opposite number, who has just taken up her job. However, will the Leader of the House remember the extremely strong views held on both sides of the House? The matter was without resolution for years and years before the Jopling Committee, let alone since. The Leader of the House indicated, without an undertaking, that at the beginning of the new Session—after the Queen's Speech—proposals would be introduced to reform the time of our sittings. Is that still his expected timetable—that something will be announced before the end of 1994?
    Mr. Newton: That is very much my hope. I can only confirm it as an expectation when I have had the opportunity for discussions with the hon. Member for Dewsbury (Mrs. Taylor) in her new position. There have been further constructive discussions during the summer. I shall look for an opportunity—I think that I have an arrangement—to speak to the hon. Gentleman's hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) on the subject.

Job Seeker's Allowance
3.31 pm
The Secretary of State for Social Security (Mr. Peter Lilley): With permission, Madam Speaker, I should like to make a statement about the White Paper on the job seeker's allowance which my right hon. Friend the Secretary of State for Employment and I published today. Our proposals have three main aims: to help people back into jobs; to improve incentives to work; and to streamline the system to give job seekers a better service.
The White Paper is a major step forward in creating a labour market in Britain which generates jobs. The Government's strategy is bearing fruit. Unemployment in Britain used to be higher than in Europe; now it is well below the European average. In Europe, unemployment has risen during the past year. In Britain, it has fallen. It has gone down by 400,000 since the recovery began. Every day 1,000 people leave unemployment. We are determined to reinforce that success.
The benefit system has a vital role to play in helping unemployed people into jobs. It should help the job seeker and motivate the jobshy. But the present system does not always do so. It contains disincentives to work. It is complex, costly and confusing for claimants. Above all, it was designed to support people out of work. But unemployed people want help back into work. That is what the job seeker's allowance will provide.
A central feature of the new system will be the job seeker's agreement. The Government already provide a wide range of programmes to keep people in touch with the world of work, to help them search effectively for jobs and to improve their skills.
Some 1.5 million opportunities on employment and training programmes are available for unemployed people this year. Now we will ensure that every job seeker can take full advantage of the help available. The Employment Service will spell out the help that the Government can provide. Job seekers will then be asked to consider the steps that they need to take to get a job. They will agree with the Employment Service a solid programme of action directed towards getting work, and they will commit themselves to follow it. The agreement will be the taxpayer's bargain with the job seeker—"We will support you in your efforts to get back to work. But you must also help yourself."
Equally important will be measures to improve incentives. The vast majority of unemployed people want to work. Until full-time work is available, part-time work can be very valuable. It is valuable in allowing people to keep in touch with the world of work and to maintain skills and work habits. It also acts as a stepping stone to a full-time job. I propose, therefore, to reinforce incentives to take part-time work.
At present, people whose partners are unemployed can be better off giving up work, too, because if they work 16 hours or more, the household will receive no benefit at all. I propose to change that. From April 1996, partners of people on job seeker's allowance or income support will be able to work up to 24 hours a week without losing benefit. We estimate that 20,000 households will gain as a direct result of that change.
At the moment, people working more than eight hours a week lose their national insurance credit, even though they may not be earning enough to pay for a contribution;
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yet even small jobs can help people stay in touch with the labour market. I shall change the rules, therefore, to allow everyone on job seeker's allowance to have a national insurance credit for work that they do.
In addition to those measures, we shall tackle a problem that has always defeated policy makers. At present, unemployed people who take part-time jobs can lose benefit almost pound for pound, yet if they could keep their part-time earnings on top of their benefit, they would have little incentive to go on to full-time work.
I propose to square that circle by introducing a back-to-work bonus. Job seekers and their partners will receive credits for part-time earnings which they can cash in when they move off benefit. For every £1 they earn above the earnings disregard, we shall set aside 50p, which they will receive as a lump sum bonus when they move off benefit into work. They will be able to build up a lump sum bonus of up to £1,000. We estimate that some 150,000 unemployed people a year will benefit from that. It will restore incentives to work part time, reward effort and honesty and be a stepping stone to full-time jobs.
The new allowance will provide financial help for unemployed people and their dependants according to their needs, and this will be paid as long as they need it. Those people who have paid national insurance contributions will receive a personal rate, irrespective of their capital or their partner's earnings for up to six months.
The present benefit system for unemployed people has grown up haphazardly over 80 years. We currently have two benefits for the unemployed—unemployment benefit and income support—and they overlap. Some people are entitled to both. Many switch between the two and the benefit levels leapfrog because they are uprated by different indices. Last year, single adults on unemployment benefit received 65p more than on income support; this year, they receive 25p less. The two benefits cover different periods. Unemployment benefit excludes Sunday; income support includes Sunday. It is time for reform. From April 1996, there will be one claim form, one set of rates and one set of rules.
The majority of unemployed people will receive the income-related element of the job seeker's allowance. Income support is the more modern benefit and its rules are aligned with those for other income-related benefits. Job seeker's allowance rules, therefore, will be broadly the same. However, they will be updated and clarified in some respects.
For example, the rule requiring job seekers to be available for work will be changed. It will specify that they must be available for at least 40 hours a week. They may, of course, take jobs offering fewer hours and they will be able to restrict their availability if they are disabled or ill or have caring responsibilities.
In the first 13 weeks of unemployment, job seekers may limit their search to their usual occupation. From then on, job seekers are required to broaden their horizons. To give people confidence to accept jobs in unfamiliar occupations, we introduced employment on trial. That allows people who have been unemployed for six months to try out an unfamiliar job without fear of losing benefit if they decide to leave after six weeks.

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We intend to ease the rules further. People will be able to take a job on trial after just three months' unemployment and to leave it after four weeks. That should help more than 200,000 more people.
The job seeker's allowance will introduce straightforward rules for the treatment of earnings. Most single people will be able to earn up to £5 a week without losing benefit. Couples will be able to earn £10 even if only one is working. That will provide extra help for 70,000 people, and the back-to-work bonus will provide an additional incentive to earn more.
Many unemployed people receive substantial occupational pensions from their previous employer. It is right that larger occupational and personal pensions should reduce the amount of contributory benefit for people of any age. The present limit, however, is too severe, so I shall remove the arbitrary age threshold and raise the amount of pension that can be paid without affecting benefit from £35 to £50 a week.
The vast majority of unemployed people do genuinely look for work, but some do not. Those who fail to meet their obligations forfeit their right to benefit. That has always been the case in principle and the new rules will make it crystal clear. Those who pay taxes and national insurance should not have to subsidise people who make no attempt to get a job, but, of course, reduced payments will be available for those most vulnerable to hardship.
The benefit system must be capable of adapting to changing circumstances, but it is sensible to test the effect of changes before introducing them nationally. We can already pilot new employment services and training schemes. For example, the job interview guarantee scheme was tested on a pilot basis and it is now a successful national programme. The job seeker's allowance will provide new powers to use local pilots of benefit regulations, too.
We have no intention of reducing benefit rates, so the Bill will specifically rule out pilots involving reduced rates. Above all, we want to improve incentives to work. The power to test improvements on a pilot local basis will be invaluable.
The counterpart of making the system harder for the workshy is making it easier for the vast majority of genuine job seekers. We are already committed to giving a one-stop service for all benefits within the Benefits Agency. Now we can extend that principle to cover the services provided by two different Departments. Together, the Employment Service and the Benefits Agency will provide a one-stop service for job seekers, so job seekers will usually deal with a single office—the jobcentre.
The Organisation for Economic Co-operation and Development has recently confirmed that the Government's strategy has given Britain the best performing labour market in Europe. These proposals for job seekers will help Britain generate even more jobs. They will help unemployed people find work; they will strengthen Britain's economy; and they will give better value for taxpayers' money. They will be welcomed by all those who want to see a prosperous economy and want to help unemployed people achieve their main goal—a job. I commend these measures to the House.
Mr. Donald Dewar: Will the right hon. Gentleman accept that I should like to be
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enthusiastic about this package if I could? I accept that it is a step forward in some senses—at least it is not the usual dirge about the welfare system as a grudging safety net and there are some signs that the Government are trying to adopt a more sensible approach to encouraging people back to work.
The main feature of the package is the job seeker's allowance itself. Will the Secretary of State accept one simple fact? Will he accept that the result, which will be a harsh experience for many, will be that when those with a full contributions record lose work they will be guaranteed help for only six months instead of 12? Will he also accept that that is a unilateral and remarkable departure from the contract entered into between the contributor and the Government, involving 10 per cent. of gross earnings within the national insurance contributions band, and that the result will be a loss of half the principal benefit? What part of the citizens charter covers this particular happening? Is there a help line that people can phone to get an explanation? What insurance company would get away with such an increase in premiums and a reduction in benefit?
Will the Secretary of State confirm that, with regard to the job seeker's allowance, at any one time 250,000 people would be better off under the present arrangements? What is the so-called saving to the Treasury? How many people under the age of 25 does he estimate will have a cut in benefit, even when they have a full contributions record, because of the introduction of the distinction between those above and below 25, a distinction with which we are familiar in terms of income support and which is now to become part of the job seeker's allowance? Will the Secretary of State confirm that the present loss would be £9.55 a week? What does he imagine it will be in a year or two?
How many of the 90,000 who will not even qualify for means-tested job seeker's allowance will be women? Is not it true that only 43 per cent. of women who will qualify on their contributions are likely to be able to draw benefit of any kind once their six months' qualification has run out? How does the Secretary of State fit that in with the rhetoric that we have heard in the House about invalidity benefit?
We have been told that about 200,000 people will be evicted from invalidity benefit by the arrival of incapacity benefit. In fact, they will be shunted—that is perhaps the elegant way in which to put it—into the job seeker's allowance. How many of them does the right hon. Gentleman think will qualify for no benefit at all because they have, very properly, been thrifty and have accumulated savings?
I ask the right hon. Gentleman specifically about the job seeker's agreement which must be signed on this occasion. I stress, on behalf of my party, that of course I accept 100 per cent. that it is the duty of anyone who is unemployed and drawing benefit to co-operate with the authorities, to search for a job and to do everything possible to better his or her situation. There can be no dubiety about that. Can the Secretary of State, however, answer one simple question for starters? What power, which is not presently available, will be available as a result of the announcements he has made today in terms of the job seeker's agreement?

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I ask that question because I recently read in the papers a quotation from the manager of a jobcentre. It happens to be in London, but it could be in any part of the country. He said:
"We already have back-to-work plans that a claimant must sign, so we are a bit puzzled about what all the fuss is about."
It is important that we pin down exactly what the new powers that are being given are and what the new sanctions are, so that we can understand and form a judgment on them.
Do the new powers simply include, for example, the provision that someone who is seen to be in default of an undertaking, under the job start programme, for example, now has not one week's loss of benefit, but two weeks' and, on repetition, four weeks' loss of benefit, or is there something else that I have not noticed—other than, perhaps, what I have noticed about the hardship allowance? In certain circumstances, people can be left not with a reduced benefit, but with no benefit at all. Does the Secretary of State expect to see that in play over a period?
I ask that question because if hon. Members, as they will, read the White Paper, they will see, for example, the power, carried forward to the JSA, but widened,
"to enable advisers to direct jobseekers to improve their employability through, for example, attending a course to improve jobseeking skills or motivation, or taking steps to present themselves acceptably to employers."
If it is simply a matter of dress, deportment and drawing up a good curriculum vitae, or trying to motivate people, no one could object. I suspect, however, that there is a great deal more in the hidden agenda, and I ask the Secretary of State to spell that out.
Can the right hon. Gentleman tell us, for example, what is the significance of what has been widely reported, which is that the targets that have been set by the Employment Service performance agreements have now been put at the figure of 135,000 people to be referred for adjudication and, therefore, potentially for loss of benefit, which is more than double the performance in the previous year? Does that reflect a change in the rules and, if so, will the right hon. Gentleman spell it out, or is it simply a matter of his rigging the performance targets and leaving the unfortunate staff to do the job on the ground? It is important that he comes clean on exactly that point.
The back-to-work bonus is, of course, welcome in the sense that it is some attempt to provide an incentive for those who seek help. It is something of a compliment to the Commission on Social Justice that it should have been unveiled as a pre-emptive strike by the right hon. Gentleman. As I said earlier, it is certainly better than the rather dreary message we get, not so much from the right hon. Gentleman as from the Department of Employment, about safety net provision and leaving everyone else to exist in the marketplace. Does he accept that the fair description of it is that someone working part time will not get any jam today, may get half-rations on some indeterminate date, but may also find that the whole pot is confiscated by the Treasury?
Let us assume for a moment that a husband is working full time and is made redundant, the wife continues with a part-time job and rolls up only half her earnings, so that in effect she is already paying 50 per cent. tax. Can the Secretary of State say specifically that the wife can claim the allowance when she moves into a full-time job or can she also claim it when he moves into a full-time job? Or
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is that a choice between them? What will be the tax treatment of that rolled-up sum at the point when that person enters employment?
My next point will please the Secretary of State. Not everything in the report is bad. The fact that employment and child provision is now available after three months out of work instead of six is helpful. A salutary lesson—I hope that the Secretary of State will accept it—is that very often there are jobs that are not entirely suitable for those to whom they are offered, and that there are occasions on which people genuinely have good reasons for giving up work.
Will the Secretary of State tell us what has happened to the £200 grant, which we understand was being tested for the long-term unemployed? I did not hear anything about that in the statement and I am anxious to know whether it is operating and what results, if any, are emerging.
On sanctions—I think that this a helpful question to the Secretary of State, as it will allow him to clarify the situation—it has been widely reported in the press that certain categories of long-term unemployed will be required to work for benefit, and that a form of workfare is on the agenda. Indeed, that was the impression that I got genuinely from something that was said this morning on the radio by the Secretary of State for Employment. Can the Minister categorically deny that a compulsion to work or sacrifice benefit is on the agenda?
Labour believes that entitlement to benefit is, of course, something which carries duties and responsibilities. I hope, however, that the Secretary of State will recognise that, if the right opportunities are provided, the problem will be dealing with the rush, not finding the volunteers to come forward. Will he join me in expressing regret that the Government, who have talked about improving training, intend—I quote from a press report on an announcement from the Secretary of State for Employment—
"to shake up the main government scheme for training unemployed adults,"—
training for work—
"by cutting its funding by a third"?
Is that a very good way of encouraging people to have hope in unemployment?
Mr. Lilley: I am grateful to the hon. Member for Glasgow, Garscadden (Mr. Dewar) for his welcome, albeit a grudging one, for many aspects of the statement. We have had a debate over the past year or so on the reform of social security, ever since I called for such a debate in the Mais lecture. During that period, the whole climate of opinion has changed in this country from one in which many people said that there was no need to reform the social security system to one where most people accept that there is a need, and that the emphasis should be on restoring emphasis, targeting benefits to where they do most good and ensuring that the system does not outstrip the nation's ability to pay. The litmus test of whether the Labour party has moved along with that national debate or is still lagging behind is whether it will endorse on Second Reading the job seeker's allowance Bill.
The hon. Member for Garscadden claimed that the vast majority of people would suffer as a result of the reduction of the contributory element of the benefit to six months. In fact, two thirds of people get back to work

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within six months. We want, as a result of these measures, to increase that proportion, because the sooner that people get back to work the better it is for them, quite apart from the savings to the taxpayer.
As for changing the terms of the contributory benefits, it has been possible for Governments of all complexions to make changes in the terms of benefits over the years as long as good notice is given. That is what we are doing.
The hon. Gentleman asked whether I could confirm that 250,000 people would lose as a result of the changes. He ignores entirely the numbers, which I mentioned, who will gain as a result of the changes. As a result of the back-to-work benefit, about 150,000 people will benefit. As a result of the changed treatment of the disregard of earnings for couples, 70,000 will benefit. As a result of the increase in the partners' earnings rule to 24 hours, 20,000 will benefit. Therefore, many people will gain, quite apart from those who will gain from getting back to work earlier.
The hon. Gentleman asked specifically about the impact of the proposals on women. I will naturally look up the information and see whether we have any estimates broken down between sex and write to him. He may care to table a written question to ensure that the information has a wider circulation.
With regard to the invalidity benefit changes, we expect some people who would previously have received invalidity benefit to be found capable of work under the more objective test introduced by incapacity benefit. They will be helped back to work through the new job seeker's allowance. That is what it is there for, and that is what they need.
The hon. Member for Garscadden accepted that it is the duty of people to co-operate with the benefits system and to seek work. That is the underlying philosophy of the allowance. He asked what power we would have that we do not have now. We will have the power to make the job seeker's agreement a requirement of benefit. The present back-to-work plans are not a requirement of benefit. Therefore, there is not a commitment on the part of the person drawing them up to follow them. There is no obligation to review them and ensure that people have followed them. The new agreement will change the nature of the allowance into a contract between the job seeker and the taxpayer which is in both parties' interests.
The hon. Member for Garscadden asked whether I expected the new sanction, which will mean that able-bodied people with no dependants and no caring responsibilities can lose all benefit, to apply often. I do not believe that it will apply often, any more than it did when we changed the rules on income support affecting able-bodied new age travellers and others. It will have a healthy effect on those who were inclined to malinger and who thought that they had a right to payment from the taxpayer indefinitely without making an effort.
I am glad that the hon. Gentleman's welcome became warmer as his comments progressed and that he offered an unequivocal welcome to the back-to-work bonus. However, he promptly became equivocal once more. The fact is that it is unequivocally better than the present system. People will have an incentive to do part-time work and they will be helped to take the further step into full-time work after that. It would be deplorable if the
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hon. Gentleman wanted to return to the old system. The tax treatment of the back-to-work bonus is very much a matter for my right hon. and learned Friend the Chancellor of the Exchequer.
I am glad that the hon. Member for Garscadden welcomed employment on trial. He asked what became of the job finder's grant. That was something we promised to pilot in our manifesto and I am pleased to say that it is being piloted at the moment. The only reason I did not mention it in my statement was that there were so many good things to include that there was no room for that as well. It is also something which we have already announced.
The hon. Member asked whether the measures would be a step towards American-style workfare. Under present arrangements, we have the power to require job seekers to make an effort to seek work, to train and thereby to maintain contact with the world of work. That is right; taxpayers expect something in return and there is nothing wrong in principle with requiring greater effort on any front from those seeking work.
The difficulty is one of practice that has always ruled out the kind of workfare programme which the hon. Member for Garscadden seems to reject. We believe that jobs come from business being profitable. It has not been possible for the Government to provide millions of jobs to operate such a system.
We will certainly require more effort from people to maintain contact with the world of work and, where appropriate, to take steps to get back to work and to improve their training and, if need be, to undertake tasks of benefit to the community. That is something which taxpayers will whole-heartedly welcome, as they will welcome the whole bunch of measures that I have included in the job seeker's allowance.
Several hon. Members rose—
Madam Speaker: Order. After those initial exchanges, which have taken almost 30 minutes, many hon. Members wish to ask questions. I ask Back Benchers and Front-Bench spokesmen to co-operate and to ask brisk questions and give brisk answers from now on.
Mrs. Marion Roe: What action does my right hon. Friend propose to take to ensure that the two agencies involved in implementing the scheme—the Benefits Agency and the Employment Service—liaise and co-operate to guarantee an effective and efficient service for their clients?
Mr. Lilley: My hon. Friend highlights a very important aspect of the reforms, which is the improvement of the service to clients and the streamlining of the delivery of what has been a confusing mixture of benefits. We have established close working arrangements and a working party between the two Departments, which has been developing plans to bring together delivery, which will involve Benefits Agency staff working alongside Employment Service staff. The claimant will receive at one place—the jobcentre—all the help that he needs, and there will be direct links to the Benefits Agency for related benefits such as sickness benefits, and so on. It

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will be an improvement in the service that we provide to job seekers. The House will think that that is right and proper.
Mr. David Chidgey: I am sure that the Secretary of State will agree that the requirement for the unemployed actively to seek work is not in dispute. However, I hope that he will also agree that little in today's statement will increase the chances of the long-term unemployed gaining and keeping worthwhile jobs. Does he agree that policies such as the benefit transfer programme, which turns welfare benefits into job subsidies, will tackle and finish off the long-term unemployment problem?
Mr. Lilley: We will, of course, examine any constructive proposals that are put forward from any quarter in the spirit that I mentioned in my original Mais lecture, but there are measures in the statement that will help the long-term unemployed. I have just mentioned the job finder's grant, which has been piloted and which is specifically aimed at those who have been unemployed for a long time, who face costs of going back to work and who will, therefore, possibly be helped by a lump sum towards doing so.
The back-to-work bonus will likewise help those who have been unemployed for more than three months, including those who have been unemployed for longer periods. Our philosophy is to try to get people hack to work as early as possible after they become unemployed and not to allow them to languish for long periods in unemployment, if that is at all possible. That is a much more constructive philosophy.
Mr. Peter Thurnham: I welcome my right hon. Friend's excellent proposals. May I contrast his positive reforms with the utter waffle in the report of the Commission on Social Justice, which apparently even includes a recommendation that everybody should have a sabbatical year? Would not that be equivalent to a 15 per cent. compulsory unemployment rate?
Mr. Lilley: I have had time so far only to peruse the proposals from the Commission on Social Justice, and I will look closer at them. I do not exclude the possibility that there will be constructive proposals within the report, although, in the first 13 pages, I found 18 spending proposals and no savings proposals to offset them. I, therefore, believe that we should pursue our strategy of focusing benefits where they can do most good and look for ways of restoring incentives and not extending the benefit system through high-spending policies and new programmes to add to those that we already have in our budget, which amounts to over £80 billion a year.
Mr. Frank Field: Will the Secretary of State give a clear undertaking that the new job seeker's allowance will be non-means tested? His statement about partners' earnings suggested that it will be. If he believes that the new benefit, which cuts the unemployment rate in half, will be popular, will he undertake that the first pilot will be carried out in St. Albans?
Hon. Members: Yes?
Mr. Lilley: I will come to that point. The job seeker's allowance will have two components. It will have an income-related element which will be available as long as people have need, and that clearly will be related to
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people's means. The other aspect, the six-month personal allowance, will be based on the contributory principle and will, as at present, be unrelated to people's capital or to whether their partner is at work. It will be abated in the case of occupational pensions, as it is at present, but I am raising the amount that people can keep before that abatement applies from £35 to £50 per week, and abolishing the arbitrary age limit. That is an important development, and it is probably a move in the direction that the hon. Gentleman would wish.
The piloting powers will relate to changes in the regulations. The basic benefit structure is to be introduced from April 1996. Once it is bedded down, we want to have the opportunity to test reforms, and any reforms that we introduce will, by definition, be attempts to improve it. I am sure, therefore, that I will be bidding to have improvements tested in St. Albans, against similar bids which will undoubtedly come in from Birkenhead.
Sir Ralph Howell: May I say how much I approve of many of the measures contained in the statement? However, I consider it to be a half-measure, rather than the major reform that is required to solve the awful problem of unemployment.
Can my right hon. Friend tell the House how much he thinks the measure will save, or will it cost more? It seems that the training and extra £10 are based very much on the North Norfolk action scheme, which is costing something like £70 a week more than the benefit that was paid earlier. Why is not the measure based on the workstart programmes which have been so successful in Kent and south London where a payment is made to an employer who takes an unemployed person off the register and real work is provided, rather than work for charities?
Mr. Lilley: My hon. Friend sought a pilot scheme in his constituency, the North Norfolk action scheme, which he has been following closely and has praised. We are seeking to learn from that and the other pilot schemes mentioned by my hon. Friend to ensure that there are genuine savings from them. That illustrates the benefit of being able to run pilot schemes, which we already can for employment services. However, I am taking additional powers to pilot changes in the benefit regulations, other than any reduction in the basic rate of benefit, which we do not propose and therefore would not seek powers to test. I am grateful to my hon. Friend for his welcome. I hope that, as a result of the experience in his constituency and elsewhere, we will learn that we can build on the changes that we have announced today to go somewhat further in the direction that he would wish.
Mr. Greville Janner: The Secretary of State said in his statement that the Government's strategy is to generate more jobs and that it is "bearing fruit". As he has taken the lead over the Employment Secretary in what is obviously an employment matter, can he answer this extraordinary conundrum: why has the Government's successful strategy resulted in an alleged reduction in the number of unemployed people but a fall in the number of people who are in jobs?
Mr. Lilley: The hon. and learned Member is wrong about that. According to the labour force survey, which is the best founded survey, there has been an increase in the number of jobs, particularly full-time jobs, recently. The hon. and learned Member casts doubt on whether our

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policies are "bearing fruit". If he visits his constituency, he will find that there are 842 fewer unemployed people now than there were one year ago—a drop of 12 per cent.
Mr. David Shaw: Will my right hon. Friend accept the congratulations of my constituents who have long felt that the benefit system encourages problems, rather than solves them? The job seeker's allowance will go a long way to helping people to solve problems and reduce their dependency on benefit. Can he comment on how the job seeker's allowance will compare to a statutory minimum wage? Will it incentivise people or will it discourage them from getting off the unemployment lists?
Mr. Lilley: My hon. Friend is right—this is a problem-solving measure. It is a measure introduced by a Government who are determined to create jobs. That is why we are not going down the road of introducing policies that would destroy jobs. Undoubtedly—this has been confirmed only hours ago by the Commission on Social Justice—a minimum wage can destroy jobs. That is why we are not going down that route, and I am surprised that any hon. Members in the House would want to do so.
Mr. George Foulkes: Is it not revealing that all the fine words ever said by this Minister and others from that Dispatch Box never turn into reality in my constituency and in others? Will the Secretary of State comment on the case of a fisherman desperate to return to work who gets a job working fewer than eight hours a week going out in boats? He has found the few hours' work that he can. Why does he no longer receive national insurance credits? How will it encourage people to go back to work when people such as my constituent lose national insurance credits when they take up a very small part-time job?
Mr. Lilley: I think that the hon. Member must have misheard what I said. We are improving the position. At present, if one of the hon. Gentleman's constituents works as a fisherman for an eight-and-a-half hour trip a week he will lose national insurance credits. Hereafter, he will keep them under the arrangements that I have announced today. So we are dealing with the very problem that the hon. Gentleman has highlighted. At the same time, I should say that the arrangements for share fishermen will be broadly carried over into the new system.
Mr. David Nicholson: There will be a widespread welcome for these measures as a way of removing obstacles and providing incentives to move people from benefit into work.
Will my right hon. Friend confirm that his Department has tested and will test the practical working of the schemes among new age travellers and others who may evade the full rigours of our social security benefits and employment placing system? In particular, will he consider providing some flexibility to enable people who are on benefit to obtain relevant training which may facilitate their eventual movement into employment?
Mr. Lilley: My hon. Friend will doubtless welcome the fact that the age-old midsummer ritual in which my Department went out to raves and places such as Stonehenge, Glastonbury and so on and set up stalls to
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hand out benefits to people no longer takes place. We have changed the rules so that able-bodied people who have no dependants will lose benefit entirely if they are not actively seeking work and do not even pretend actively to seek work or to be available for work. We are trying to tighten up the measures that record where people have claimed when they are moving about the country. On all those fronts, we are making progress in dealing with exploitation of the benefits system by those who choose a non-conventional life style, about which otherwise I have no feelings at all.
Mr. George Mudie: The Secretary of State suggests that the changes will be of benefit to the unemployed, yet on two occasions he has been asked to state the costs. May I ask him specifically whether the so-called generous measures will cost the Department money or save the Treasury money?
Mr. Lilley: The hon. Gentleman is still stuck in the past in the debate on social security. We have seen a substantial increase in social security spending in this country and others over the years.
Mrs. Ann Taylor: Because of unemployment.
Mr. Lilley: Not primarily because of unemployment but because of the growth of dependency, the growth of old age and other factors. We should seek ways of concentrating that huge sum of money—£85 billion—where it can do most good. It costs every working person £15 every working day simply to finance social security. We should not measure the charitableness of our nation by how much extra money we can spend on top of that sum. The measure that I have announced today will save £200 million in a full year in the direct budget. To the extent that the measures are successful in getting people back to work earlier, which is what we want to see, the savings will be much greater still. I hope that those savings will be positively received by everyone. Surely no one wants to spend money on supporting people out of work. We always want to help people back into work.
Mr. Alan Howarth: May I welcome what I understood to be my right hon. Friend's intention to proceed with great caution in requiring unemployed people to take part in workfare schemes? Has he studied the American experience, which shows that compulsory schemes yielded few or no benefits at considerable costs? Does he accept that the voluntary schemes, such as those in Massachusetts, produced better results? If any additional public funding were to be available here to support workfare schemes, the money might be better spent on education, training and child care. If we are to reduce dependence, what really matters is the availability and accessibility of adequately paid jobs.
Mr. Lilley: We will obviously proceed cautiously in all those aspects of the new allowance that I discussed, especially when applying the pilot powers that we will gain under the benefit to test the new measures. I take my hon. Friend's point. We would be unwise slavishly to follow policies in the United States, which tend to be set in an entirely different framework, relate almost exclusively to single parents and are not geared to the needs of this country. We have the long-standing power to require people to take work when it is available and is

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offered to them, which is absolutely right and proper. The Government do not have the ability to create the millions of extra jobs that we want—no Government do. Such jobs can come only from a more vibrant economy and labour market, and the measures will help to achieve those.
Mr. Gerry Sutcliffe: When making such a statement, is not the Minister embarrassed at the scale of the piecemeal effect that it will have? In areas such as my constituency, we must create 1,000 jobs a year just to stand still. This is only a small measure. When will the Government start to consider the need for full employment and how will the measure create that employment on its own? People want real jobs and real prospects. The manufacturing base of the country has been lost, especially in areas such as Bradford. How will the measure help people in Bradford to seek work?
Mr. Lilley: The measures that we have announced today are a further important step and addition to the strategy that we have been putting in place for some years to give this country the most successful labour market of any country in western Europe. Our youth unemployment is substantially lower than that of the rest of Europe at about 13 per cent.—it is half as high again in Europe as a whole and it is 23 per cent. in France and 35 per cent. in Spain. Why are we more successful than those countries, which allegedly have better training and education? I point to the minimum wage and the social chapter. If anyone is serious about improving employment prospects in this country, he or she cannot simultaneously advocate the minimum wage and the social chapter.
Mr. Nigel Forman: Is my right hon. Friend aware that many of us on the Conservative Benches believe that, in an increasingly flexible and insecure labour market such as that which we have today, it is sensible to have a flexible and responsive social security and employment benefit system to respond to that situation? In that context, why, even with the benefits of computerisation, does it seem to take so long between the announcement of such timely and sensible decisions and their implementation? I noted two cases—the partners' earnings rules and uniform claim forms and rules—whose implementation will be delayed until April 1996. Is not it possible to speed things up a little?
Mr. Lilley: My hon. Friend makes a good point about needing a flexible system to respond to a rapidly changing labour market. That is why we are having a pilot scheme. In future, we want to be in a position to respond.
The new allowance will be introduced in April 1996. All those other measures are being introduced as part of the new allowance. Why does it take so long? First, we have to obtain parliamentary approval. The measure is likely to go through the normal processes and I suppose that we will not have approval until next summer. Then we must introduce the regulations, under the primary powers, and the organisational changes to bring together Benefits Agency and Employment Service staff. We are developing plans to do so and we will have to develop the necessary computerisation. It would be virtually impossible to introduce the system before April 1996, but once it is in place we will be able to make changes in the
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regulations much more rapidly, within the primary legislative structure and subject to the approval of the House.
Mr. Malcolm Chisholm: Will there be anything in the legislation about job seekers from other European Union countries? May I tell the Secretary of State that I was horrified at my surgery on Saturday when a young Spanish woman told me that she had recently lost her job and was being denied income support in spite of actively seeking further employment?
Mr. Lilley: There are no specific changes in the White Paper relating to people from other countries in the European Community; it relates purely to our domestic situation. We will of course continue to have reciprocal arrangements with other countries, both in the European Community and in the wider ambit of European co-operation involving other countries, specifically to help people who wish to seek work across international boundaries. Those will continue as at present.
I should be happy to look into the case that arose at the hon. Gentleman's surgery to see whether the treatment is appropriate.
Mrs. Jacqui Lait: May I welcome the back-to-work incentives in my right hon. Friend's statement, and ask how many people he expects to benefit from the 24-hours relaxation of the rules for national insurance credits and from the back-to-work bonus? In the brief time at his disposal, has my right hon. Friend discovered anything in the Commission on Social Justice that matches those back-to-work incentives?
Mr. Lilley: We believe that some 150,000 people will gain from the back-to-work bonus, and that that could be more if more people respond positively to the existence of the bonus. Some 20,000 people should gain from the change in the partners' earnings rule; again, that could be more if people respond positively. Some 70,000 people will gain from the £10 disregard for couples where only one of them is working and, again, that could be more if people respond by working and declaring their earnings in those circumstances.
It would not be fair of me to make a comprehensive judgment on the proposals announced by the Borrie commission today, but I have not so far been able to see in any of the reports that have come through or from my own perusal of the document anything as comprehensive or as positive as we have been able to announce today. The commission is rather stronger on analysis than on diagnosis and proposals for the future.
Mr. Dennis Skinner: Is the Secretary of State aware that his announcement is nothing short of an insult to the intelligence of more than 4 million people in Britain who do not have a job—never mind the fiddled figures—and to the 30,000 miners who were chucked on the scrapheap by the Government? They are not workshy—they had their jobs taken away from them. It is an insult to the shipyard and textile workers and to one third of those in our manufacturing base who have lost their jobs. We are faced with a Government who are backed by Tory Members who line their pockets with five, six and seven other jobs, and the Secretary of State

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accuses people who want to work of being workshy. They ought to be ashamed of themselves. Why don't they get out of the road?
Mr. Lilley: The hon. Gentleman does not seem entirely to support the proposals which I made earlier, but he will find them of benefit to his constituents. We have put in place special measures in mining areas and, as one would expect, miners—being the aristocrats of labour—have often been extremely successful in getting jobs elsewhere. They are certainly not workshy. I know that, and I said that the majority of people in this country are not workshy. The minority who are will benefit from the motivation that the measures which we have introduced today will give them to find work. That is only right and proper and is part of their contract with the taxpayer.
As for fraud and abuse, the biggest fraud with which I have had to deal since I have been in office was the £500 million hole left in pension funds by the socialist millionaire Robert Maxwell.
Mr. Patrick Nicholls: In complimenting my right hon. Friend on the proposals that he announced today, may I suggest that the White Paper might give an opportunity to address a situation where somebody who is unemployed and is actively seeking work is using his spare time to undertake a course of study? What can happen—it varies from locality to locality—is that the mere fact that someone is doing a course of study is held to be in some way incompatible with his being available for work. Surely there is nothing incompatible when a person says that if a job is available, he will take it, but that, in the meanwhile, he would like to use his time constructively to get himself back to a better-paid job, where we can tax him more and raise money to apply to what we would want. Surely the White Paper at the very least gives us an opportunity to look at that situation.
Mr. Lilley: We will, of course, look closely at those rules, but, broadly speaking, the intention is to carry over much of the way in which people are treated at present into the new system. We will look closely at how that is done to ensure that we can still keep to the principle that people must be available for work without inhibiting unnecessarily their ability to acquire skills, to study and to develop their employability.
Mr. Barry Jones: How many of our people in Britain are unemployed and how many of those are long-term unemployed?
Mr. Lilley: My right hon. Friend the Secretary of State for Employment reminds me that the figures are 2.6 million and 1 million respectively. Either way, I can tell the hon. Member that it is too many. The intention of the measures I have announced is to reduce the number of unemployed people, but particularly to reduce the number of long-term unemployed people, because the longer people are unemployed, the more demoralising it is for them and the more their motivation is reduced; their skills get stale and they become potentially less attractive to
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employers. That is why we want to get those people speedily back to work through the job seeker's agreement and the measures that will be spelled out in it.
Several hon. Members rose—
Madam Speaker: Order. I shall attempt to call those hon. Members who have been standing up to ask a question because they have been waiting for a long time, but I plead again for brisk answers to questions. We have taken almost an hour on this statement and we will be coming back to it at some time in the future.
Mr. Iain Duncan Smith: Does my right hon. Friend agree that the key factor about the job seeker's agreement is simplicity? Will he confirm that the allowances will all be claimed on one form and from one location, which is what I and others have recommended for some considerable time? That will benefit those who most need to know about it.
Mr. Lilley: Yes, I can confirm my hon. Friend's point.
Mr. Derek Enright: Does the Secretary of State agree that his statement proffers no solution—which is more quality jobs—but essentially props up employers of slave labour, who pay cheap wages and provide rotten conditions? Does he therefore agree that he is, essentially, subsidising the inefficient and the unimaginative?
Mr. Lilley: No, Madam Speaker.
Madam Speaker: Thank you.
Mr. Bernard Jenkin: I thank my right hon. Friend for his imaginative proposal, which will be welcomed by the British public, principally for two reasons, which I shall cite briefly. They will welcome it, first, because it unequivocally links the business of being unemployed with the business of looking for a job and, secondly, because it does not increase the burden on the working taxpayer, who is already paying £15 a day towards the cost of our social security system. Most people believe that that is too much.
Mr. Lilley: I entirely endorse the points that my hon. Friend has made with considerable clarity. I could not have put it better myself.
Mr. Paul Flynn: Does the Minister agree that his statement means that we will have a benefits system that has more in common with the handout principle of the Poor Law than the principle of a national insurance scheme of benefit? Surely the reason why income support payments and unemployment benefits are the same or less than they were 15 years ago is the salami cuts made to those benefits, which have been imposed while the amount available for contribution has increased. Will he answer this simple question: how many people will lose out?
Mr. Lilley: The hon. Member epitomises the backward-looking tendency in the Labour party, always harking back to the 19th century and never looking forward to the 21st century. I hope that the proposals will put us in a position to have a much better working labour

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market in future than we have had in the past. I would hope that, if he cannot, at least his party will endorse them.
Mr. Geoffrey Clifton-Brown: Does my right hon. Friend agree that the vast bulk of the unemployed want work and, therefore, welcome the proposals in the job seeker's agreement? Will he also confirm that there is a direction for people who disobey the agreement? Will the White Paper address the problem of the small number of people who breach that direction and will the job seeker's allowance be put at risk thereby?
Mr. Lilley: I can confirm that there will be a direction to people to undertake specific courses of action that will increase their chances of getting work. Should they refuse to do so, they would, of course, suffer sanctions, though I would hope that they would generally do what is in their own interest.
Mr. Eric Illsley: Will the Secretary of State accept that the problem, particularly in areas such as mine, is the lack of any jobs, not just suitable ones, for the long-term unemployed? Many of my constituents, such as the 14 per cent. unemployed and the 30 per cent. of males who are economically inactive, will regard the tightening of the test—the agreement is merely restating the availability for work test—as an insult. Can the Secretary of State also tell us how many Department of Employment staff will be made redundant as a consequence of combining the two agencies to provide the new job seeker's allowance?
Mr. Lilley: I appreciate that unemployment is higher in some areas of the country than others and that it is therefore much more difficult and disheartening. None the less, even in those areas, a considerable number of people get back to work and we must give every help to others to do likewise. In the region in which the hon. Gentleman's constituency is situated, the reduction in unemployment over the past eight years has been about one third. That may still leave a way to go in his constituency and others, but this measure will help achieve that.
Mr. Nigel Waterson: Does my right hon. Friend accept that many people will welcome the extension of the employment on trial scheme? I have met people in my constituency who are not workshy, but genuinely apprehensive about some of the jobs for which they are sent for interviews.
Mr. Lilley: That is very much the purpose behind the employment on trial measures, which have been successful as implemented so far. We are easing them in in a way that will help some 200,000 extra people try out jobs. I hope that, in most cases, they will choose to stay with them, but in some cases they will find that they are not suitable and will suffer no penalty as a result of leaving after four weeks.
Mr. Tony Banks: As the Secretary of State has made a number of references to the workshy, what is his estimate of the current number of workshy among those who are unemployed?
Mr. Lilley: I believe that the vast majority are keen on getting back to work and all the evidence that I have is to that effect. But we all know that a minority of workshy people exists. There is no point in trying to put a number
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on it because if one sends out a questionnaire people will not list themselves as workshy—[Interruption.] The hon. Gentleman might do so, but others would not be so frank. A significant minority still needs motivating in this way and it is in their interest to receive this kind of help and encouragement.
Mr. Peter Hain: Having admitted savings or cuts of more than £200 million, why does not the Secretary of State call this the job fleecer's allowance? It fleeces the unemployed of the right to benefit, just as his economic policies fleece them of the right to work.
Mr. Lilley: Success in this area must ultimately result in less spending on unemployment, not more. Our objective is to ensure that spending is well focused where it can do most good but, above all, to ensure that people get back to work as rapidly as possible.

Foreign Office and ODA Spending Plans
Motion made, and Question proposed, That this House do now adjourn.—[Dr. Liam Fox.]
4.32 pm
Mr. David Howell: The Foreign Affairs Select Committee is grateful for this opportunity, in Government time, to have a short debate on its second report. This is in lieu of a normal estimates day debate, for which there was not time in the summer.
The second report covers a number of issues concerning Foreign Office and Overseas Development Administration expenditure. In particular, it looks at the planned fall in the size of the diplomatic service over the next three years; the growth in expenditure on UK contributions to the UN, to UN peacekeeping and particularly to the European Union's overseas aid budget, all of which are legally binding and over which Britain has little control; and the effect which that has on the overall aid budget, in that the bilateral budget will shrink to less than 50 per cent. of the UK's total overseas expenditure as the European Union aid budget increases.
The report also looks at the changing pattern of overseas aid and investment in developing countries. What were hitherto regarded as marginal institutions are becoming increasingly central to the development effort. Those include such bodies as the Commonwealth Development Corporation, the Natural Resources Institute and the know-how fund.
We looked at the need for a new role for the Commonwealth Institute which, since we wrote our report, seems to be groping its way towards finding such a new role. We examined it in the general context of the growth in support for the Commonwealth—a global institution whose membership is increasing. It is a club that is growing, not shrinking, and becoming more significant in tomorrow's world.
We returned to the subject of cultural diplomacy and reaffirmed the Committee's support for, and strong feelings in favour of, the work of the British Council and the BBC World Service.
The report discusses a wide range of issues and I shall concentrate on only one or two aspects. I shall concentrate especially on what is happening to our aid and development policy and to those parts of Foreign Office expenditure that support the policy.
Two major things are happening. First, our aid and development budget is becoming multilateralised. In other words, Foreign and Commonwealth Office and Overseas Development Administration votes are now being led by demands over which the United Kingdom has less and less direct influence and for which, by definition, accountability to the House is minimal, and which are binding on the UK. We have undertaken to adhere to treaties that commit us legally and unavoidably to those increasing demands.
The second thing that is happening is that traditional patterns of development aid throughout the world are being replaced with a vastly greater role for the private sector in development, leaving aid—that is, Government resources, or taxpayers' money—to be focused more on poverty relief, basic needs, emergency relief, humanitarian aid and so on. That certainly applies to this country's development activities.
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I shall discuss both changes in detail. First, on multilateralisation, one can see exactly what is happening by reading page 32 of the Foreign Affairs Committee's report. The UK's contribution to the United Nations' regular budget is increasing from £26.5 million in 1991-92 to £38.8 million this year. The UK contribution to UN peacekeeping is increasing from £177.6 million in 1992-93 to £310 million in 1994-95. The part of the overseas aid budget that is spent via the European Union is increasing from £564 million in 1993-94 to £745 million in 1996-97. The proportion of our aid budget that is spent via multilateral agencies, including the European Union, will have increased from about 29 per cent. in 1979-80 to 52.8 per cent. in 1996-97—much more than half.
All those types of expenditure are increasing at a time when public expenditure is under extreme restraint, and in many cases being reduced. That has caused, in the minds of my colleagues in the Foreign Affairs Committee—I think rightly—a double worry, which we have tried to air in the report.
The first anxiety is whether the European Union proportion of our aid budget, which is being removed from the control of Government and of the House, is being properly evaluated and monitored. We can argue, and no doubt will, about whether it is a good thing that it is happening at all; to find the answer, one must seek out agreements in the margins of past European summits to discover what was taken away, what was conceded and who wanted which slice of power transferred to which directorate in Brussels.
However, given that that has happened, is that large, and growing, chunk of our aid budget—and of other member state countries' aid budgets—being properly administered, evaluated and monitored? The Committee has set itself that question and, since finishing the report, has prepared, and is about to complete, another detailed report on precisely that question, which it will present to the House shortly. Without anticipating the work that we have done there, there are some worries about what is happening to the strict control and monitoring of that enormous chunk of our aid programme, which in the past was under the direct administration of Whitehall and Ministers and accountable to the House.
The second worry is whether the priorities are right in that aid sector. The European Union budget is soaring upwards—it has been greatly increased. It is a budget for administering aid in a variety of ways—much of it is in the form of traditional Government-to-Government grant; some of it is of the concessionary finance variety. That is happening while, as our report states, the diplomatic service is being cut over the next three years and while—although this is outside our report's scope—Army manpower is being cut. It is happening while support for agencies such as the British Council and the BBC World Service is being reduced over the next three years. Many people would argue that such organisations are moving to the centre of our overseas effort and the promotion of this country's interests, as well as the promotion of development and improvement in developing countries.
One is compelled to ask whether the right budgets are being increased and the right ones decreased. Above all, is it right for European Union aid to be expanding at this great rate and for all the new plans to be developed by the appropriate directorates in Brussels—for aid and support in one place and grants for development in

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another—when priorities throughout the aid establishment, if one can call it that, are changing radically and private investment flows are replacing the role of aid in development? If one wants proof of that, one can see it in the entirely new line being taken by the international financial institutions. They now say that the main thrust of development work should be through encouraging the private sector to wheel in and deliver the improved infrastructure and many of the better-quality services that have not been developed as a result of handing aid from Government to Government through the budgetary systems.
It is my personal view—not a conclusion of the Committee's report—that, at the very least, there is a strong case for re-examination of policy in the light of those two huge developments, one of which was pinpointed so clearly in the report. If I were asked to name the headings of the policy re-examination, I would suggest that the first should be to clarify the response of our policy-makers, the Foreign Office and the Overseas Development Administration, to the new ideas being promoted by the international institutions for private sector development to take some weight off the traditional aid budgets. The development assistance committee of the Organisation for Economic Co-operation and Development issued a detailed set of guidelines urging Governments and officials responsible for aid policies to promote private sector development by transferring the emphasis of many of their programmes.
It was with such thoughts in mind that the Committee, when taking evidence for its short report, asked whether there was a new role for our Commonwealth Development Corporation. That is a classic example of an organisation which, over the years—it was originally called the Colonial Development Corporation—has combined the best of public support with the best of private enterprise and investment. Is not that the sort of model for future development aid that the Government should be studying? It is worth asking whether the CDC should be encouraged and expanded rather than regarded as a sideshow among the Government's development policies.
We note that Ministers are planning increased borrowing powers at some stage for the CDC. It would be interesting to hear when those borrowing powers are to be increased. Would such a policy require legislation before the House and, if so, when will time be made available for it? If we are now in a world in which private investment can fill the gap and take some of the budgetary pressure off aid budgets, which all Governments are having to re-evaluate—particularly the American and Japanese, but also our own and the French—we should be building up organisations such as the CDC, which can deliver development in a way that merely pushing aid between one Government and another did not seem able to achieve.
Mr. Dennis Canavan: I am all in favour of encouraging private investment in genuine development projects, but surely private investment should be a supplement rather than a replacement for public investment. One of the report's most serious revelations is contained on pages XVIII and XIX, where the Committee refers to the reduction in real terms in United Kingdom Government expenditure on aid. It also states that we are moving away from the United Nations target of 0.7 per cent. of GNP. Table II on page XVIII
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shows that we are nearer the bottom of the league than the top in terms of expenditure on overseas aid. The Government must address that important issue.
Mr. Howell: The view of the international finance institutions on private sector development is that it should be additional. Aid budgets around the world are to be increasingly constrained and private sector development can fill the gap much more efficiently.
The hon. Gentleman rightly said that aid budgets, including this country's, were not conforming to the United Nations target. Although he and I were in complete agreement over the report, we differ as to the importance in the world into which we are moving of the old United Nations targets. They are reiterated year after year and everybody pays lip service to them. But if we want the sort of development that is happening in the booming Asian economies, is beginning to happen—one hopes that it will happen much more—in parts of southern Africa, and has happened to a great extent in the developing countries of Latin America, we must expect the overall investment and flow of funds into those countries to come increasingly from the private sector rather than Government aid. I think that the hon. Gentleman and I differ on that subject and I hope that he will have an opportunity to put his view. I did say that I was voicing my views and straying outside the Committee's report.
My final question for my right hon. and hon. Friends in the appropriate Departments is whether the time has come to review the Bretton Woods institutions. They were constructed in a world where the developing third-world countries were all seen as being stuck in a morass of poverty which, in many cases, was getting worse all the time. Now, some parts of the societies in the developing third-world countries have rapidly lifted themselves out of that morass.
A good part of the dynamic growth of the world economy now comes from the developing world. This year the so-called less-developed countries will grow by 5.6 per cent., which is well above the level that will be achieved by the developed world. We are beginning to see both trading power and economic power shifting to the booming Asian economies that are starting to deliver living standards as high as, and in some cases higher than, those of the European powers. I believe that political power will follow. I say that not just because I think that it will happen, but because when international institutions come together there is a change of tone.
The so-called third world is no longer prepared to take lying down the diktats of the institutions representing the views of the so-called rich west. The balance is changing and our policy should accept that. The fastest growth in the developing world is being driven not by old-style Government aid or United Nations targets—as mentioned by the hon. Member for Falkirk, West (Mr. Canavan)—but by increasing flows of inward investment, liberalisation, cutting taxes and unravelling state monopolies. That is going on in almost every developing country, sometimes with benefit, sometimes with little benefit, but it is going on.
It may be that, given our increased worry in this turbulent world that emergency relief will be more and more in demand and that humanitarian relief, help with basic needs and a focus on poverty and the poorest people is the real No. 1 priority, we should realise and accept that aid is not necessarily the most powerful instrument

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for economic development in the medium term. Therefore, the more we can focus what aid resources we have—it would be nice, of course, to have more—on humanitarian and basic needs, the better. I notice that a number of organisations outside the House are urging just that.
Mrs. Ann Clwyd: The right hon. Gentleman raised the issue of development in Asia. May I remind him of what is still one of the poorest countries in the world, Cambodia, in south-east Asia? I notice in the Foreign Office answers to the Committee's questions that we are cutting back on the British embassy in Cambodia, a country that was denied access to the world institutions—the International Monetary Fund and the World bank—and a British embassy until very recently. Given that Cambodia is still troubled, is still developing and still has major problems, does he believe that the size of the British embassy should be cut?
Mr. Howell: Perhaps my right hon. Friend the Minister of State will comment later on that issue, but the hon. Lady is right. In Asian countries such as India, areas of enormous prosperity and wealth stand side by side with areas of still blinding, breathtaking and increasing poverty. No generalities can be safely sustained in Asia.
Dame Elaine Kellett-Bowman: Does my right hon. Friend agree that Cambodia, like some countries of Africa, illustrates the point that countries that have concentrated on economic development and have not been at each other's throats fighting are the ones that have got ahead? Does he further agree that if we can do something to reduce the warfare, we shall do a great deal towards improving those countries' welfare?
Mr. Howell: My hon. Friend is profoundly right. Peace, stability and a degree of reliance on some sort of rule of law are the fundamental requirements for economic enterprise to grow. Where those things have been applied in Asia, there has been a miracle growth in wealth; where they have not, nothing of the sort has occurred.
Our report considered the work of the Foreign Office in relation to the European Union and to preparations for the intergovernmental conference in 1996. We hope that papers will be available to the House in ample time. The Government made an observation in reply that was not quite clear to me and about which I should like to hear more. In observation (h), Ministers talk about the possibility of a United Kingdom parliamentary report being made to the intergovernmental conference study group, which I think was set up last summer in Corfu. The group has a funny Spanish name that I cannot remember at the moment. Supposedly, it will be a preparatory group for the IGC's agenda, which is important for our country and for the House. What does that mean? How will we initiate a United Kingdom parliamentary report? Who will write it and who will read it? I should certainly like to know what the Government have in mind.
The world has totally changed, both with the evaporation of the Soviet Union and the end of the communist threat, and the rising economic dynamism of the Asian economies, which are delivering growth at rates that make even the post-war European miracle look mild.
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They are delivering not low-technology, but high-technology, high-quality manufactures at a pace that will make any challenge we have had so far, including that from the Japanese, look mild. The Committee's deeper concern is that, although the world has changed, the spending priorities of the Foreign Office and Overseas Development Administration still are inclined to reflect a bit too much the old order.
Where there is a new order, it is not necessarily the right one. It is being dictated by the moguls of the European Union, who are inclined to look inward rather than outward on these issues.
Mr. Michael Jopling: I should like to say how much I agree with my right hon. Friend about the need for flexibility, particularly in the Asian region. That takes me to the point that the hon. Member for Cynon Valley (Mrs. Clwyd) made about Cambodia. If she were to read, on the first page of the minutes of evidence, the memorandum submitted to the Committee by the Foreign and Commonwealth Office—it comes at the end of the conclusions—she will find that flexibility has been applied in relation to Cambodia. A number of Committee members visited Cambodia not very long ago. The memorandum states:
"With the ending of the UN operation in Cambodia, the size of the British Embassy in Pnomh Penh is to be reduced producing savings of some £100,000 annually."
Most of those hon. Members who went there would agree that that was the right policy as the UN operation had been run down. That displays the flexibility that my right hon. Friend was talking about.
Mr. Howell: I have come to the end of my remarks. I hope that the debate will encourage, or begin to encourage, the realisation that a change of priorities is needed. I hope that some of the points that Committee members raised in the report, such as those on the virility and activity of the Commonwealth, will be reflected a bit more in policy developments in the future. We used to be all in favour of the Commonwealth. Then it was written off. Now we suddenly find that everyone wants to join it and that it is becoming a rather useful global network. On that final thought, I think that I had better sit down. My right hon. Friend the Minister will no doubt have a chance to intervene later.
4.56 pm
Mr. Allan Rogers: I congratulate the Chairman and members of the Select Committee on their exhaustive report and on choosing overseas development aid as the highlight of their report. It is an issue that concerns all hon. Members very much. Such a spotlight is a good thing at this stage in our development and our relationships with other countries. Many aspects of the report concern us, but I know that many of my hon. Friends want to participate in the debate and will deal with more specific matters. With some exceptions, I should like to generalise in my remarks. I hope that many of our overseas friends, who from time to time bend our ears about the problems in their countries, will not be offended if their particular issue is not brought out in the debate. Obviously, time does not allow to us deal with every problem in the world.
One important issue dealt with in the report is the British Broadcasting Corporation World Service and the British Council, which has been alluded to by the

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Chairman of the Committee. I admit that I read the section of the report dealing with the BBC World Service and the British Council with some dismay. It is yet another manifestation of the Government's consistent inconsistency. On the one hand, they extol the virtues and importance of those organisations; on the other, they cut the resources available for the organisations to carry out their functions. For example, there will be a cut in BBC World Service resources from £175 million a year to £158 million in real terms.
Those organisations have unparalleled reputations. The Select Committee said that they have
"a record of providing cultural, technical and educational assistance worldwide and of encouraging international understanding and the growth of democratic institutions."
The World Service has a global audience of 130 million—three times, I believe, that of Voice of America and five times that of Radio France. It broadcasts in 41 languages. Last year, I understand that it received more than half a million letters from viewers, far more than even most Members of Parliament. It immeasurably disseminates our democratic and social aims throughout the world—what an area in which to penny-pinch. It is a British flagship, but the Government can only count the coppers. I am sure that some of my hon. Friends will emphasise the shabby treatment of the BBC World Service and the British Council.
In just over two years, Hong Kong will be returned to the People's Republic of China after many years of British rule. One would have hoped that at this stage, after 10 years of discussion and negotiation, we would now be dotting the i's and crossing the t's in the extensive and important matters that have to be decided for the future well-being of all involved—not only those in Hong Kong but those in China—and for the sake of the future trade, political and cultural links between Great Britain and the People's Republic of China.
Where are we in that process which has been going on for 10 years? We are bogged down politically, commercially, legally and almost every other "ally" one can think of. Indeed, we seem to be up a blind alley in a morass of bad faith, bad tempers and lack of trust. We are not merely blocked at a point along the path or the through-train line; there is a real possibility that in two years everything will be turned back beyond the starting point. That is the Chinese threat. Something has gone disastrously wrong, but it is no good simply blaming China.
Let us consider what the Chinese have done in the past 10 years. They have signed the joint declaration and passed the Basic Law. We should remember that the Basic Law is a Chinese law passed by the People's Assembly in Peking. It was an acknowledgement that there would be one country and two systems and that there would be an evolving process of democracy in the first two years of Legislative Councils after 1997, taking us roughly to 2004. The Chinese acknowledged that there had to be change, so what has gone wrong? They were significant acts for a communist country and a totalitarian regime, but the Government's report gives a most disappointing summary of them. Indeed, it is an almost offhand dismissal of the situation and, frankly, does a great disservice to the problem. The Minister with
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responsibility for Hong Kong will perhaps be able to clarify the situation, if not today, then at some future point.
Mr. Nigel Waterson: Before the hon. Gentleman moves on, does he accept that there are three possible explanations for the lamentable, if partial, breakdown of negotiations with the People's Republic of China? The first is bad faith on our part, which I wholly reject. The second is bad faith on the part of the Chinese. The third is simply the change of climate inevitably brought about in Hong Kong and, more particularly, in the leadership in Beijing following the events of Tiananmen square?
Mr. Rogers: Yes, indeed. Like members of other parties, we have no sympathy with the abuse of human rights in the People's Republic of China and unequivocally condemn those abuses, but the hon. Gentleman perhaps illustrates the reason why the problem exists: he talks about bad faith instead of trying to engage in a more positive dialogue with the Chinese. A solution must be found.
In 1997, Hong Kong will be handed to the Chinese. For the sake of the population of Hong Kong, for the sake of Hong Kong's future relationships within the special area designated under the Basic Law, and for the sake of the relationship between Great Britain and the PRC, a solution must be found—and quickly. Because of its importance, we shall be looking for a full debate on Hong Kong in the coming parliamentary year.
Mr. Mike Gapes: Perhaps I can help my hon. Friend. The Select Committee on Foreign Affairs has produced a report on China and the Government have responded to it. So far, however, the Government have not chosen to allow time for the House to debate it, even though it was produced before the report that we are debating today.
Mr. Rogers: I thank my hon. Friend for his help. It is not often that a prophet can call for a debate and have that call endorsed so quickly and efficiently. I am sure that the Minister will have heard my hon. Friend and that, when he is able to gather his thoughts on the matter, he will enable such a debate to be held.
We recently debated the Intelligence Services Act 1994, which we supported. It is alluded to only briefly in the report, especially in relation to the designation of expenditure available for our security services. We supported the Bill at the time, but I must admit that it has been a grave disappointment to us. We tabled some constructive amendments but, except for those involving the number of people to sit on the Intelligence and Security Committee, the Government were unable to accept them.
We did not and do not want details of operations or any information that would put the security of individuals or the country at risk, but the Act has created only a facade of openness. The circle of tasking, operating and accounting for our intelligence services remains closed. The Intelligence and Security Committee will comprise parliamentarians, but it will not be a parliamentary Committee. It will have very limited powers, it will not report to Parliament, and we shall receive only information that has been filtered through the Foreign Secretary and the Prime Minister.

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As I have said, the report that we are debating rightly highlights expenditure on overseas aid. I think that it was out of loyalty to his party that the right hon. Member for Guildford (Mr. Howell) perhaps failed to emphasise the neglectful way in which the Government have handled the problem of overseas aid. I know that some of my hon. Friends wish to speak on the subject, so I shall not go into detail. I understand that the Pergau dam scandal is being dealt with separately by the Select Committee, but I will say that I do not think that it was the best example of bilateral aid. However, we await the report with interest. I fear and am sure that it will be another sad, sleazy story that will reflect badly on the Government and their approach to overseas aid.
Mr. Canavan: The Select Committee has published a report on the Pergau dam and the Government have published their response. We now need Government time for a debate on the matter so that we can bring the Government to book for their disgraceful behaviour in this instance.
Mr. Rogers: Yes, it was the debate on the report to which I was alluding. It is clear from both reports that the resources available for overseas aid in general are falling, as the Chairman of the Select Committee said.
As the Chairman also said, more and more money is being sucked into the European pot for uncontrollable multilateral aid rather than into bilateral aid over which we have some control. Indeed, the fact that multilateral aid will rise from 45 per cent. to 53 per cent. over the next few years fills me with alarm. Where is this European money going? I was rather amused by the suggestion made by the right hon. Member for Guildford as to how it was decided how the money was to be spent—"in the margins of some summit" was, I think, the expression that he used. I do not understand how we can control this aid. What are the mechanics for reporting back to us where the aid is going?
Some adjustments need to be made in our overseas aid programme. Bilateral aid to Africa is to fall by 17 per cent., or some £60 million over the next three years, and that to Asia is to fall by £31 million. Clearly, we need to consider how we are to develop a poverty focus for the aid that is available.
Another point in relation to diplomatic expenditure is the issue of Cuba and the Government's attitude towards it. We feel that the continuing United States embargo of Cuba is as much an act of political spite as the result of any great strategy. We support the Government in their criticism of the embargo, but we ask them to press harder so that the movement within Cuba towards a more open and pluralist society can gain influence and momentum. It surely makes sense politically and morally for America and the rest of the world not to reduce a country's economy to ruins and not to subject the most vulnerable—women, children and old people—to degradation, as is the case in certain parts of Cuba.
Two years ago, we debated the Foreign Compensation (Amendment) Bill in Committee. Only last week, the issue of our relationship with Iraq arose again. The Bill was intended to enable the United Nations compensation commission to handle the compensation to be given to those affected by Saddam Hussein's brutal invasion of
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Kuwait. What has happened since the Bill was enacted? On a number of occasions, we have asked about the operation of the Act, but we have had negative responses from the Government.
What is the present position on Iraq's observation of and adherence to UN resolution 687, from which the funding is supposed to originate? What action is proposed to enforce the resolution? Is oil being sold illegally? What has happened to the sequestered Iraqi assets? Have millions been spent simply on funding the bureaucracy set up within the UN? How many of the 3,000 United Kingdom claims have been processed by the UN compensation commission? How many have been settled? There are people who have lost substantial personal assets and who require substantial compensation; yet they are still waiting, two years after the Bill was enacted.
I will briefly refer to President Clinton's test ban proposals and the Government's attitude towards them. The report refers to our relationship with the United Nations, which is important. The specific problem that faces us, however, is acute. France, our Community partner, Russia and America have already announced their participation in a moratorium on the testing of nuclear weapons. Of the five major nuclear powers, only Britain and China oppose such a complete test ban agreement. The scientific community has said that no further testing is necessary either for defence or for scientific reasons, and that whatever work requires to be done can easily be done under laboratory conditions. Why does the Foreign Secretary not make the adoption of a nuclear test ban one of the tests of a common foreign and security policy and approach in the European Community? If agreed, it would be a big step along the road to promoting the non-proliferation of nuclear weapons, which is a vital step towards successful renegotiation of the non-proliferation treaty, which is due for renewal in 1995.
Mr. David Howell: If the hon. Gentleman checks, he will find that the United Kingdom, with the other nuclear powers, has agreed in principle to the comprehensive test ban treaty. We consider it important that any future requirements might have to be met by simulations and not by nuclear testing. We have agreed to that. The question is whether agreement should be made a condition of a successful non-proliferation treaty, which is a matter that the Select Committee on Foreign Affairs is currently considering and on which it will report to the House quite soon.
Mr. Rogers: The point that I am trying to make to the right hon. Member for Guildford is that on all occasions when a ban has been proposed in the UN—and as recently as a year ago—the Government turned their face completely and utterly against subscribing to a nuclear test ban. They say that they might decide to subscribe to such a ban in principle, but when will the action take place? The non-proliferation treaty will come up next year and unless the Government make their mind up fairly quickly about taking action rather than merely saying that they subscribe to a ban in principle, I am afraid that we shall not get a non-proliferation treaty signed next year.
We have a unique position in international affairs. No other country is at once a permanent member of the Security Council, a leading member of NATO, a member of the Commonwealth, a member of the European Union, a member of G7, a member of the conference on security and co-operation in Europe and a member of the Western

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European Union. We are in a unique position to use not just our position and policies, but our views and aims for the betterment of the world, but we can do that only if there is the political will to do so. In a rapidly changing world, we must realign our thinking and policies if we are to meet the new international challenges.
There is great danger in the world because the relative stability of the cold war stand-off has resulted, to quote the departmental report, in
"a world where disorder is spreading and where nationalism is out of hand."
There is great disappointment also because the new world order, which everyone wanted to come to fruition, and the hopes that the UN could fulfil its mandate, have not been realised. However, the danger and disappointment must not be accompanied by despair. There is hope, but only if we are prepared to search positively for solutions to the conflicts in the world.
Disputes and instability, born of economic conflict, territorial claims, and ethnic, religious and nationalist fundamentalism, are all too frequent. Whether those wars involve high-technology weapons or, as my hon. Friend the Member for Pontypridd (Dr. Howells) has so often reminded us, small weapons such as land mines, mortars and small arms, the results are much the same. Repression replaces Government institutions, accompanied by massive refugee flows which are creating a huge burden on the rest of the world.
At present, there are more than 30 million refugees world wide. There are 26 conflicts raging in which two or more countries are at war. There are 23 other areas of potential conflict between nations and there is tension in another 24 areas, making 73 possible flashpoints throughout the world.
There is no evidence available that regional organisations can tackle regional problems. Indeed, the evidence is the other way. The European Union, Western European Union and NATO have all failed with the problems in Bosnia and in other parts of Europe. The Organisation of African Unity has failed in Africa. The same is true throughout the world. It is becoming more and more obvious that the United Nations is the only organisation that offers hope. That is not to say that other organisations cannot play a part, but I believe that no other organisation has the potential for bringing peace that the UN has.
The challenge that we have to face—this comes through in the general remarks in the Select Committee report—is that the international community must be able to intervene in new ways to head off catastrophe. The "Agenda for Peace" from the UN Secretary-General noted that between 1945 and 1987 there were 13 peacekeeping operations; in the past five years, the organisation has established a further 13. The aggregate cost up to 1992 has been about $8.3 billion. Huge sums are being spent on operations that could well have been avoided—I am not saying that they would have been, but they might well have been—if we had kept up our efforts of preventive diplomacy, as outlined in the departmental report and as mentioned in the Select Committee report.
I do not believe that military solutions can enforce political conclusions in those areas of conflict. What is lacking is not military technology, but political will. That is a problem of this Government. I believe that the Government should decisively support a number of clear
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policy areas: the agenda for peace is a good start. They should support the reform and enlargement of the United Nations Security Council and the decision-making processes there; the necessary transition of the role of NATO; the move by the USA and Russia to a nuclear test ban, which should be supported in a much more positive way, as I suggested; continuation of the important dialogues of the conference on security and co-operation in Europe; and reform of the World bank and other facilitating agencies, to which I know that my hon. Friend the Member for Southampton, Itchen (Mr. Denham) would like to refer if he can catch your eye, Mr. Deputy Speaker.
The ideas offered in the report, "Agenda for Peace", offer the best hope by far for world peace, and in the long run they will be the cheapest option. We must decide what role we must play and then allocate the resources to fulfil that role. That is why in another area we have called for a full-scale defence review, and that is why we ask the Government to address those urgent problems and provide the resources required to solve them.
5.20 pm
Mr. Richard Ottaway: I welcome the chance to speak in the debate, particularly because the evidence that was presented to the Select Committee was presented in late April and early May, and between that time and the Government's response, there has, of course, been quite a significant change in policy by the Overseas Development Administration. It has announced a substantial increase in funding for population programmes: the funding now available is at least £100 million over the next two years. It is not new money but a reallocation of funding. It has been made quite clear to me that we are moving away from spending on infrastructure projects and are targeting the relief of poverty.
The announcement made in July of this year was made very much in anticipation of the United Nations international conference on population development, which took place in Cairo in September, and about which I will speak in a minute. The emphasis is consistent with recommendations contained in paragraph 70 of the Select Committee's report, in which it refers to the changing nature of aid. Contained in that paragraph is the emphasis or recommendation that expertise be made available, through agencies such as the United Nations, to improve
"the effectiveness and cost-efficiency of international efforts to encourage sustainable development."
I am pleased that, in their response, the Government have accepted that recommendation. It is probably fair to say that the Cairo conference was a macro presentation of the policy that the Government are prepared to set. As a Member of Parliament, I was a fairly rare example of a member of a UK delegation at a UN conference.
I pay tribute to the Egyptian Government for the way in which they laid on the conference. Some 18,000 delegates were there and it was held at the height of serious tension in Egypt—I was disappointed to see on the news last night that it still exists there—amid threats from fundamentalist terrorists to destabilise it. It is a tribute to the Egyptian Government that there was no incident whatever throughout the fortnight, as several Heads of Government were present. It was a very successful conference.

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As I sat in the opening plenary session with my hon. Friend the Member for Banbury (Mr. Baldry), the Under-Secretary, who was representing the British Government, and as I heard the speeches of world leaders—from Mr. Boutros Ghali, the Secretary-General of the United Nations; Gro Brundtland, the Prime Minister of Norway; Benazir Bhutto, the Prime Minister of Pakistan; President Mubarak of Egypt; to Vice-President A1 Gore of the United States—which all came in the first morning, it struck me that everything that I and the British Government have argued for in recent years was at last being realised and was coming true. There was, of course—
Mr. Ernie Ross: There was only a slight difference.
Mr. Ottaway: Does the hon. Gentleman wish to intervene?
The hon. Gentleman asked from a sedentary position about the differences of emphasis. A perfectly good example would be Benazir Bhutto, who argued against abortion but fully accepted that population growth and the population explosion was a global problem which had to be addressed. In that, she differed from Gro Brundtland, but both countries signed up to the final declaration. That is what I mean by the change of emphasis.
President Mubarak, in his opening speech, said that the conference was not a separate event and that it should not be isolated from the past, that it was not something taking place in a vacuum, and that it had to respond to people's hopes and find common ground in open and free discussion.
The basis of the consensus was quite clear and, despite last-minute media criticism, there was quite clearly an overwhelming desire that the conference should succeed. The Group of Seven had asked it to come up with a solution to world population growth, and succeed it did. It has now produced a global action plan. The big difference is that, on that occasion, unlike 10 or 20 years ago, the developing world was there and asking for help. We now have common ground. Poverty is the challenge and sustainable development built around population programmes is the answer. The common ground was that there was a full understanding of the nature of the problem. There was an understanding of how to address it. There was an understanding that there are now clear definitions for aid and of the role that reproductive health can play in solving the problems, and an idea where the resources were coming from.
After all, it is quite clear that there are parts of the world, which, as a result of excessive population growth, face scarcity of resources, crime, tribalism, disease and unemployment, all of which are destroying the social fabric of societies. Rwanda is a classic example of a country in which a territorial dispute has been caused by overcrowding. The truth is that the stork is becoming the bird of war.
The conference took on a life of its own. Delegates came from all over the world, and I am pleased to tell the House that, under the chairmanship of my hon. Friend the Member for Arundel (Sir M. Marshall), the Inter-Parliamentary Union held a parliamentarians' day, where members present, from throughout the world, came and spoke in full support of the aims of the conference.
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The extraordinary feature of the conference was the implacable opposition to its aims and objectives, sadly, from the Roman Catholic Church. I say sadly because I believe that the Roman Catholic Church recognises the problems that are faced by the world, but is simply unable to answer the fundamental question. What does one say to an African woman, living in absolute poverty with six children, who wants no more children? In the end, the Roman Catholic Church lost the argument, because it had no answer to that fundamental question.
The Roman Catholic Church did the conference a favour in that it kept the whole conference in the world's headlines for the best part of a week. Very few people to whom I have spoken since returning from Cairo in September were not aware that the conference had taken place. They are thoroughly aware now of the seriousness of world population growth—at some 250,000 new persons every day—and the significance of that conference.
The media reporting of the conference was first class. I find myself surprised to say that. The interesting reason for that—perhaps it is a lesson for many other areas of media reporting—is that the media were denied access to the main committees, because there simply was not room for the 2,000 members of the press present to go and listen. Reporters were forced to dig for their stories; they did not simply regurgitate press releases. They got in there and found out what the issues were. As a result, the reporting back from Cairo was far more sensible and more serious than much of the reporting that occurs in this country.
Mr. Waterson: With regard to my hon. Friend's previous point, does he accept that it was not just the opposition of the Roman Catholic Church to some proposals that caused controversy, but the similar opposition from an entirely different quarter—the countries in which a type of fundamental Muslim creed is held? Those countries were just as plain in their opposition to certain proposals as was the Catholic Church.
Mr. Ottaway: My hon. Friend is absolutely right. However, those countries placed a different emphasis. From the word go, Benazir Bhutto was prepared to support the conference's objects even though she could not support certain aspects which she felt were contrary to the Koran. However, having heard the opening day's speeches, I believe that the Vatican should have piped down. Instead, it went full profile in its implacable opposition to everything that was achieved.
I pay tribute to our ODA officials who staffed the United Kingdom delegation. Their professionalism, which was quite exemplary, was recognised by most of the other delegations at the conference. That professionalism, and the recognition of it, had great influence on the European Union position. If it is not a rather hackneyed phrase, it is fair to say that as a result of the quality of our officials, Britain was able to punch well above its weight at what I believe was a very significant conference.
I also acknowledge the role of the non-governmental organisations present in Cairo. For a long time, the NGOs have treated population issues very much at arm's length because they have been nervous about them. However, I am pleased to say that they have shaken off their hesitancy and have made a substantial input into the thinking on

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that subject. Anyone who left the main conference and went to the NGO forum would have realised that that was where tomorrow's ideas were coming from.
In his opening remarks, my right hon. Friend the Member for Guildford (Mr. Howell) emphasised the importance of bringing the private sector into aid programmes. Non-governmental organisations, such as Marie Stopes International, are advocating social marketing which basically involves persuading people to buy their own contraception. The social marketing of contraception in the third world is a good example of an area in which the private sector is beginning to play a role.
The NGOs made us address the question of reproductive health. They drew to our attention the importance of the education of women. As the hon. Member for Rhondda (Mr. Rogers) said, a great emphasis was placed on migration. There are about 30 million homeless people travelling around the world. However, perhaps the hon. Gentleman would acknowledge the fact that that is largely the result of over population. The United Nations Fund for Population Activities report which was published last year drew attention to that point.
The most significant thing to come from the conference in Cairo was the issue of empowerment of women. Everyone concerned about that subject now realises that unless women become empowered—(Interruption.] Before the Government Whip, my hon. Friend the Member for Gedling (Mr. Mitchell), becomes too nervous, let me say that I mean by that that women should have the right to decide whether they want to use contraception and whether it should be available. That is the kind of language that came from the Cairo conference, which should be carried forward to the Beijing conference on women's issues which is to take place next year.
I met a female Nigerian Member of Parliament at Cairo who told me that she had six children, and that she had come to Cairo to ensure that she did not have 36 grandchildren. I am proud of what the British Government have achieved. I believe that, as a result of our efforts, she will not have 36 grandchildren. It is important that we build on the success of Cairo and that we implement the action plan, which has been agreed by hundreds of countries. For the future's sake, we must not relax our efforts.
5.34 pm
Mr. Greville Janner: I am sure that the hon. Member for Croydon, South (Mr. Ottaway) will forgive me if I do not follow him down the path of contraception. Instead, I want to stick to the absolutely first-class Select Committee report, to which the Committee received a very second-rate answer from the Government.
I have visited vast numbers of diplomatic posts in my work with the Employment Select Committee, or privately or on behalf of the Jewish community. I have always been impressed by the standards of our diplomats and the service that they provide. On the whole, they do an absolutely first-class job, often in difficult and dangerous circumstances.
I mourn the dreadful killing of one British citizen, and the injuring of others, in Egypt. I mourn the death of my friend, Gamini Dissanayake, who was murdered yesterday in Sri Lanka, along with some 50 other people. We salute him and we send our condolences to his widow and to the
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Sri Lankan people. I mourn the awful killings in Israel last week, the murders of the people on the bus and of Sergeant Wachsman.
All over the world, there are those who believe that by murdering civilians, they can kill peace. They are wrong. In the process of being proved wrong, they cause misery in a world of danger. Our diplomats live and serve in that world of danger and we are proud of them.
Paragraph 78 of the Select Committee report is right. It states:
"The budgets for the Foreign and Commonwealth Office, the Overseas Development Administration, the BBC World Service and the British Council have been cut significantly for the next three years. All provide impressive services despite these financial cuts. It will not however be realistic to expect them to go on providing services as good as they now provide if they have to suffer repeated reductions in resources. We recognise that resources are no substitute for well-focused policy. However, we urge that the redefinition of the United Kingdom's interests, policies to further those interests and the deployment of resources in the service of these policies should go hand in hand."
I have searched the Government's reply for a reference to that paragraph, but there is none. I looked for a reference to the earlier paragraphs on which it is based, but there is none. The Government's response ends at paragraph 77. When I turned over the page to paragraph 78, that page was blank.
I appeal to the Government to listen to the unanimous report of a very respected Select Committee, not just to reply to those parts with which they immediately agree, but to seek ways in which they can respond positively and maintain the resources to enable our diplomatic corps and the organisations surrounding it to do their job.
The Government's normal reaction is to say, "Oh well, we must assess the results." Unfortunately for the Government, diplomacy is not like a school or a hospital, in respect of which they can issue tables of attainment. It is not a matter of saying how many Bulgarian anglophobes have been turned into anglophiles in how long, over what period and with what results.
Diplomacy is not a shop. I am aware that the foreign service draws inspiration from Marks and Spencer, but it cannot calculate sales of British policy per square foot of shelf space in any of our great residences or embassies. It is not possible to make assessments like that. Assessments can be made in three ways: respect, human rights and business.
The respect in which our country is held abroad greatly depends on the work of the diplomatic corps. In its turn, that depends much on the resources that the Government are prepared to allow it. The closure of fine embassies is no answer when we want to retain respect, or especially when we want to use that respect for political purposes, to maintain Britain's place in the Security Council and to achieve the political results that we all want from our diplomatic corps.
I pay tribute to the great efforts of many of our diplomats working in countries in which human rights traditions are rotten, nil or very defective. Often, they handle delicate cases, and often they succeed. I know how much help not only Jewish people but many others obtained from our diplomats when the Soviet Union was a dictatorship. I know how many others today depend upon our embassies for a form of decent insurance in a thoroughly wretched world. Our diplomats sell Britain and our products.

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Recently, I travelled with the Employment Select Committee to Finland. For the first time in my life, I went on board the much-criticised royal yacht Britannia. There were no royals on board, the ceremonies were all very proper, and it was an interesting day. The royal yacht attracted top Finnish industrialists to enable us to talk to them about Britain and to promote our trade. We cannot assess the effects of that. Later, when the Royal Marine band beat the retreat, hundreds of important Finnish people were looking at something that Britain was providing them with, which was a release from the usual boring ceremonies that most countries offer on their national days.
I asked the Foreign and Commonwealth Office whether there was a way in which we could assess its impact on sales. It came up with an answer—in September a contract was signed between BP and the Republic of Azerbaijan estimated to be worth about $8 billion. The chief executive of BP wrote to the permanent under-secretary, Sir John Coles, saying that it would not have been possible to sign the contract without the FCO's help and representation in Baku. He gave permission for that to be quoted.
In the autumn of last year the embassy residencies in Paris and Rome were used for the successful launch of the Rover 800, one of the most successful epochs in British motor manufacturing. All over the world, our embassies and our residencies are being used to promote our commercial interests, and the Foreign and Commonwealth Office is on our side.
My favourite FCO story involves the tourist who was standing in Whitehall and who said to a policeman, "Excuse me, but which side is the Foreign Office on?" The policeman replied, "Well, madam, it is supposed to be on our side, but I sometimes wonder." I have had wonderings, particularly about middle east policies. I have had arguments; we do not always agree. On the whole, though, our diplomats do a smashing job. It is not sufficiently recognised that they are being asked to do that job with smaller embassies and less impressive means to impress more impressive and less impressed foreigners.
While our strength diminishes, it is the height of stupidity to say to other people, "Look how small we are; we aren't great any more. We can't afford a decent embassy and we can't even afford to entertain," and then expect overseas business people and politicians to treat us as though we were still Great Britain.
We should not beat the retreat on our overseas strength. We should not cut our wonderful BBC World Service, which has a reputation for honesty which it does not always deserve but which is believed by people all over the world, as a happy relic of the war. We should look to the Commonwealth Secretariat and say, "Yes, we saved it; isn't that good?" We should build our overseas resources and accept that the Foreign Affairs Select Committee report is an excellent one that the Government should implement.
5.43 pm
Mr. Nigel Waterson: I should like to refer to three aspects of an excellent and workmanlike report, such as we are used to seeing from the Select Committee: first, support for British trade promotion
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abroad; secondly, cultural diplomacy, which right hon. and hon. Members have mentioned; and thirdly, rising to the bait of the hon. Member for Rhondda (Mr. Rogers), Hong Kong.
On trade, I always believe that the old jokes are the best. I enjoyed the rendition by the hon. and learned Member for Leicester, West (Mr. Janner) of the story about the Foreign and Commonwealth Office.
Mr. Janner: It was a classic story.
Mr. Waterson: It was a classic story, rather like a classic automobile. I wonder whether the hon. and learned Gentleman remembers the story attributed to Lord Tebbit, who is reported to have remarked that the Minister of Agriculture, Fisheries and Food looked after farmers and the Foreign and Commonwealth Office looked after foreigners. It that was true, it is certainly no longer the case. In travelling around the world both before and after I came to this place, I have found that the Foreign and Commonwealth Office is very much on our side, in particular on the side of British business and industry. There is great support for that in the report.
The thrust of the report is the background of reducing resources and how they are being used to best effect as they are cut. In paragraph 18, the Committee says that the FCO is making considerable use of new information technology after what it describes as a shaky start. I particularly commend the reduction in the number of home staff, so that the teeth rather than the tail of the Foreign and Commonwealth Office are better deployed abroad.
One of the most convincing sections of the report relates to the increasing demands on all levels of the diplomatic service. Nowhere is that more evident than in the size and number of our overseas posts. It is impressive, albeit in attempts to reduce financial commitment, that in our policy of closing or scaling down some overseas posts, we recognise areas where our trade interests are most important. I am pleased that the report recognises the growth of representation in our far eastern posts. That is an area of almost limitless potential in terms of our exports and selling expertise abroad.
I now refer to the service that we provide for business men. Much of it has to do with the messages that we politicians send to career diplomats. There was a time—happily, long gone—when being assigned to the trade aspects of diplomacy was regarded almost as punishment, or the diplomatic equivalent of being sent to Siberia. Recently, that has changed.
It is difficult for right hon. and hon. Members when they travel the world not to be impressed by the expertise and commitment of staff in many places around the world, working for the FCO in promoting British exports. It is also impressive to see the almost seamless way in which they co-operate with the Department of Trade and Industry in trade promotion. There has been enormous improvement in recent years, but there was plenty of scope for improvement.
I shall say a word about the messages we send. Opprobrium is no longer attached to people going into trade diplomacy, but I sometimes wonder, when speaking informally to diplomats, whether there is enough career benefit in spending time on it. Every diplomat who wishes preferment or promotion, especially so-called high fliers, should show that he has spent a significant period in trade

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promotion at one of our overseas posts. Only then will the business-oriented culture, which the hon. and learned Member for Leicester, West supported, permeate upwards through all ranks of the FCO. That is extremely important.
Before I leave that subject, I shall talk about the costs of such an enterprise. It is, by definition, something that we cannot share with other countries. The report makes the point—if it needed making—that we are doing a great deal to share costs with our European Union partners in representation abroad, and that is as it should be. For example, sharing premises in Kazakhstan, which are used by the visa sections of Britain, France and Germany, is a sensible way of spending our resources more wisely, especially with the growth in the number of places where we must be represented following the breakdown of the Soviet Union as we knew it.
Pre-eminently, one area where the sharing of costs simply is not possible is that of trade and exports. Paragraph 27 of the report states:
"These new developments may demonstrate a paradox facing diplomatic services of EU member states: on the one hand we recognise that in certain matters such as common visa requirements or common stances taken by the EU … they will increasingly be working together … On the other hand there will always be circumstances when national policy interests will prevail, in some cases in a highly competitive way: some of our EU partners are among the UK's main commercial competitors."
That is so true. As we have a scaling down of expenditure in some areas, and a scaling down of representation in some parts of the world, it is vital that we recognise that trade promotion and exports must take a larger share of a somewhat declining cake.
My second area of concern is so-called cultural diplomacy. Hon. Members have talked about the importance of the British Council and the BBC World Service. I am especially pleased that the report makes an effort to highlight the importance of those media in our relations with China. It is a sad fact that grant in aid to both the British Council and the BBC World Service is being reduced in real terms. We know that the British Council has embarked on a radical restructuring process. Despite that, there is a great deal to be said about the sort of process that it is going through; many organisations need some outside impetus to engage in such a massive review of their commitments and aims.
As one travels behind what used to be called the iron curtain, it is difficult not to be impressed by the way in which the British Council has moved rapidly and effectively to represent itself in these places. Recently, I had the benefit of visiting the council's posts in the former Czechoslovakia, particularly the Czech Republic. Support in the local community for the council's presence was impressive.
The British Council was shut down in 1948 and reopened only a few years ago. It was somewhat alarmed to find that some people were trying to return books that they had borrowed in 1948, and were worried about the size of any possible fines. I am pleased to say that the fines were waived in the circumstances.
A tremendous feeling for Britain and the British way of life has been generated by the British Council. I wonder whether, because of budgetary constraints, the council has been obliged to look not at those countries where perhaps one could not say that its task was over—by definition, its task is never complete—but at those where it has gone an enormous way to reaching the local population, and
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perhaps where other media are effective. It has had to swing many its efforts and some of its best staff to new, almost virgin territories. The British Council is nothing if not impressive when one sees it up close.
I turn now to the subject of the BBC World Service. The significance of World Service radio is legendary throughout many parts of the world. The response of the Foreign Office to the report states:
"As part of its support for United Kingdom commercial services, the FCO will continue to help World Service television extend its services in all overseas markets, including China and to achieve its aim of world-wide coverage."
There is a tremendous opportunity for expansion of both the scope and the nature of programming of World Service television. As I travel around looking at CNN, I sometimes wonder what World Service television could achieve with CNN's budget. I will not go on to say what I think CNN is doing with the budget it currently enjoys—that is a matter for another debate—but it is an example of what can be done on a relatively small budget.
The Government are correct in letting World Service television develop on a commercial basis, but they make the point that they want to encourage its growth in many areas, especially in places such as China. It is difficult not to be impressed by the potential and the current performance of World Service television. Some time ago, a decision was taken in principle not to fund television as such, whereas radio receives a grant in aid. However, the Government must do everything they can to ensure that World Service television has the commercial backing to become an even bigger player in international television.
When I check into an hotel in a strange country and turn on the television, I certainly get a boost when I find that the World Service, as well as CNN, is available—[Interruption.] I am careful to register that fact on my return to the United Kingdom. I mean CNN no harm, but sometimes it is a bit like electronic wallpaper; the World Service gets more to the heart of the matter. I endorse the response of the Foreign Office on the subject of cultural diplomacy.
We should not lose sight of the importance of World Service radio, although it has cut its operations in some areas and its programming in some cases. It has been broadcasting in new languages such as Azeri and Uzbek, and increasing its broadcasts to some parts of the former eastern bloc. Those are grounds for optimism and approval by the House.
Finally, I shall touch on the subject of Hong Kong. I had not intended to raise the subject of Hong Kong this evening because, frankly, I did not think that it came within the ambit of the debate. However, as it was referred to at some length by the hon. Member for Rhondda, it is only right that I take up some of the points that he made as the Opposition spokesman.
The hon. Gentleman called for a solution. Who could disagree with that? If only it were that simple. Recently, I was in Hong Kong as a guest of the Government, and had the chance to meet a whole range of people, including the Governor, to discuss the present position.
My first point is that there is progress at certain levels on a number of projects. The airport project is proceeding in some respects. However, as we know, there has been little progress, if any, through the Joint Liaison Group, despite the efforts of both the Foreign Secretary and the Governor of Hong Kong. Recently, in a speech to the Legislative Council, the Governor suggested that the

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United Kingdom and the People's Republic of China should draw a line under recent events and try to make a fresh start. That will be difficult.
As I told the hon. Member for Rhondda, the main difficulty is that attitudes in Hong Kong changed in 1989 following the events in Tiananmen square. A sort of democratic enthusiasm was awakened. Attitudes in Peking also changed because the leadership got a tremendous shock from the events in Tiananmen square and, to some extent, the apparent support for the students there from many people in Hong Kong. That is what has blighted relations between China and the United Kingdom since that date.
It is simplistic for people, including some members of the business community in Hong Kong, to attribute problems that have happened since events in Tiananmen square to the arrival of a new Governor. That is far from the truth. The truth is that the foundations for the present misunderstandings and lack of progress were laid in the tragedy of Tiananmen square.
Even if there is a will, as I am sure there is, on the part of many leaders in Peking to make progress now, there is a difficulty in that there is a sense of paralysis in the Government of the PRC. I do not believe that much progress will be made for the foreseeable future unless there is a change of leadership. Such a change is inevitable at some stage.
Therefore, we must simply press on as best we can with the nuts and bolts, whether by trying to progress the airport project, tidying up the statute book or whatever. We must deal with many of the practicalities which have to be tackled sooner or later.
Despite the occasional churlishness of the Chinese Government, we shall bequeath them in 1,000 days or so a vibrant economy, a fairly new but enthusiastic democratic system, reserves which are several times greater than those we promised to leave behind, and a new airport and associated infrastructure which will be the envy of the rest of the world. If they choose to regard all that in a churlish light, perhaps there is nothing much that we can do about it, yet we have a duty, as the hon. Member for Rhondda said, to the people of Hong Kong. I believe that this Government, this country and this Governor have done everything possible to ensure a smooth and peaceful handover of that miraculous state of Hong Kong to the People's Republic.
On that note, I again congratulate the Select Committee on its report. It is timely, workmanlike and detailed. We look forward to future reports of that Select Committee.
6.1 pm
Mr. Charles Kennedy: I do not envy the Minister's task in replying to the debate. It has certainly ranged freely across a variety of issues, many of which have gone beyond what is within the blue covers of the report. There has been a certain lack of focus to some of the discussions.
The hon. Member for Eastbourne (Mr. Waterson) made some observations vis-à-vis Hong Kong, which was also mentioned by the hon. Member for Rhondda (Mr. Rogers) from the Labour Front Bench. Perhaps the one clear message that emerges from this small debate on the Select Committee report is what my colleague the Liberal
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Democrat Whip said in business questions last Thursday. There is clearly a pressing need for a full-scale debate on Hong Kong. I hope that that message has been communicated to the Foreign Office and the Government business managers, and that we can have such a debate in due course.
The hon. Member for Eastbourne said that what the Opposition Front-Bench spokesman had said was too simplistic. Equally, it is too simplistic to say that all the problems stem from Tiananmen square. When one goes to the far east and speaks to the Chinese representatives, one is left a little short for an answer when they say, "If the British now regard democracy as so overwhelmingly important, why did they take 150 years to do anything about it?" That is a good question, to which there is no immediate answer. It is not an issue that we can explore in this debate, but I underscore my view that today's debate has revealed so much parliamentary interest in Hong Kong on both sides of the House that we want to see it discussed further.
I pay tribute to the right hon. Member for Guildford (Mr. Howell) for his chairmanship of the Select Committee, and to his colleagues for their excellent work in producing this detailed summation. An important summation of information it is, too. I wish to concentrate on two broad areas—first, the trends and developments that we have seen in overseas aid expenditure; and secondly, the cultural aspect, not least the BBC World Service.
The findings of the report show that, as a share of national income, British international aid expenditure continues to fall well below the United Nations target of 0.7 per cent. of gross national product. Britain's current commitments total a mere 0.31 per cent. of GNP. One must bear in mind the fact that 0.7 per cent. is not in itself the most optimistic or ambitious of global targets. My hon. and learned Friend the Member for Fife, North-East (Mr. Campbell) pointed out to me earlier that, several decades ago, the target was 1 per cent., so the ambition that had been set had fallen.
As a nation, we are not even meeting half the stated target. That surely is a matter not only for regret but for considerable shame. The freeze on the aid budget means that in real terms Overseas Development Administration expenditure is set to fall fairly rapidly in the next three years. That raises a question about the priorities of the Government. That development will pose a serious threat to the amount of bilateral aid allocated to the poorest countries, especially in Africa, because such aid is the first to fall under the Government's axe when they seek to comply with European Union targets.
The ODA has insisted that the cuts in the bilateral aid programme will not affect existing commitments to the neediest, yet its own figures suggest that Africa stands to lose some £60 million, and that Asia, which has also been touched on in our discussions this evening, will lose a further £31 million. That is disgraceful in humanitarian terms, but it is also self-defeating for the interests of Britain internationally, as the hon. Member for Rhondda said.
If one goes right back to the work that was done by the Brandt commission, the thesis remains intact and valid that, as well as a moral need to help those parts of the globe that do not enjoy anything approaching reasonable living standards—quite the opposite—we have a

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long-term self-interest in providing aid. It makes sense for Britain to be seen as not merely generous but enlightened by plugging our economy into the emergent economies.
Such countries sit on greater natural resources than we command, not only in and around our shores but in the western world as a whole. It will become essential to our interests to have good relationships and good economic co-operation with such countries. In a spectacular, international, sense we are cutting off our nose to spite our face by reducing overseas expenditure. That is the first point, and the general point.
The second, more specific, point is cultural diplomacy, which has already been mentioned by several hon. Members, and not least the BBC World Service. Except among those who perhaps follow the more detailed media pages in some of the better newspapers, it is perhaps not appreciated that it has been a massive setback to BBC World Service television to have been excluded from Rupert Murdoch's Star satellite services in the far east.
We are talking about, in China alone, 1.2 billion people—between a fifth and a quarter of the world's population. That is an enormous market that will inevitably open up. One needs only to go over the border to Hong Kong and the special development zones to see the rapid commercial transformation that has taken place in the past decade.
The Governor of Hong Kong was correct to acknowledge recently that mass communication made dictatorship more difficult. That is true. The more that people see, not least through the medium of television, what can be available and what living standards are regarded as the norm elsewhere, the more people will demand that of their rulers, and the more a regime such as that in China will become unsustainable when it goes through its next change. All that means that the World Service is of particular import in broadcasting accuracy and the truth.
If we had asked people a few years ago in an international opinion poll what they rated most highly about Britain—we will leave aside the monarchy, which is a sticky subject at the moment, for these purposes—they would probably have named our university system, our national health service and the BBC World Service.
Two of those services have not fared happily under Conservative Governments in the past 15 years and, increasingly, the World Service is not faring so well either, as the figures in the report make clear. Given current fevered comment in and around the Lobbies about interests, I suppose that I and the hon. Member for Newham, North-West (Mr. Banks) should place on record the fact that we have a degree of interest in that we occasionally contribute to the World Service and receive a few pennies or ecu for doing so.
Internationally, the World Service is taken as a yardstick of all that is best in this country—a sense of fairness, accuracy and fair play. Frankly, it is almost impossible to put a price on the importance of that role.
The Government are consciously diminishing their support for the radio side of the service. The television sector now has to be funded independently and commercially; as a result, it has lost out in terms of clout and access to the Asian Star service satellite. That is a severe setback for the World Service and for what it represents, but it is also a severe setback for this country's interests.
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In conclusion, there are genuine and deep grounds for concern over what the report reveals about the Overseas Development budget, bilateral aid and the BBC World Service. The paucity of the response in the Foreign Office memorandum also gives grounds for concern. The Minister has a fairly broad remit to respond to; I hope that he will be able to go further, and do so more convincingly than the memorandum was able to do in response to this excellent and comprehensive report.
6.12 pm
Mr. Ted Rowlands: The hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) mentioned the roles of the BBC World Service and of the British Council and there is consensus on the enormous importance and value of those institutions.
I shall draw hon. Members' attention to two issues highlighted in the report, one of which also concerns an important institution—this place. I cannot find a single precedent in the history of the British Administration for the fact that more than half the expenditure of a major Government Department will be spent outside the control and scrutiny of this House. That fact should not merely be allowed to pass and noted with some interest. Irrespective of the merits of the case, for the next 18 months more than half the expenditure of the Overseas Development Administration will be outside the power, scope and scrutiny of the Public Accounts Committee. I am old-fashioned enough to believe and have always understood that the origins of this place were rooted in our scrutiny of public expenditure, yet the report identifies the fact that a huge and significant area of public expenditure will be beyond the scope of the Public Accounts Committee and therefore of parliamentary scrutiny.
I am sure that you have often emphasised to groups of people and organisations, Mr. Deputy Speaker, our exclusive rights over taxation and legislation—neither of those rights is now exclusively confined to the House. I am sure that you will also have explained the fundamental issue of scrutiny of public expenditure. Yet, the report states that more than half the expenditure of one Department will not be subject to scrutiny by the PAC or to the sort of scrutiny that those of us who have been brought up in the parliamentary tradition will want to uphold, and it appears that that aspect of the report will pass relatively unnoticed. That fact has been compounded by the way in which it was done.
The report identifies our annoyance and agitation. The Committee was vigilant on European issues. We spent much time asking Foreign Secretaries to come before us before European Council meetings and we tried to bring them back afterwards. Yet, the decision to allow that extraordinary situation—more than half ODA expenditure will now be spent by others and will not be subject to the scrutiny of the House—was made at the Edinburgh summit in 1992, as part of a horse-trading arrangement. We were not told beforehand that it was possible or likely and we were not told afterwards that it was a consequence of those decisions. On both scores, a serious parliamentary issue arises from the decision and we have sought to identify it in the report.
I know that other hon. Members wish to speak, but I must briefly mention another question thrown up by the report. Increasingly, our annual reports on public expenditure by the Foreign and Commonwealth Office

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provoke the question: what value do we place on diplomacy and how do we evaluate it, given the pressures on that expenditure?
My hon. and learned Friend the Member for Leicester, West (Mr. Janner) spoke eloquently of some of those values, but historically the image of the Foreign and Commonwealth Office has not lent itself to public sympathy. I recall vividly that when I was first appointed as a Minister in the FCO I felt rather pleased with myself and rang my wife to tell her. I got a very frosty reception. She asked why I thought that it was promotion or progress to move from being a Minister dealing with housing, health and roads, to get caught up in the world of foreign affairs and diplomacy and to join an establishment that belonged essentially to the English upper middle class—historically, the Foreign and Commonwealth Office and its staff have had that image.
By the end of the week, I thought that I had got over the problem. I went home and my wife asked me what I had done in my first week. I said that she would not understand as I had been dealing with a complicated problem concerning the Banabans—the inhabitants of Ocean island. My wife replied, "I know all about that. There was a television programme on it this week. The FCO and the Government are doing them down and depriving them of essential interests."
An early lesson for any Foreign and Commonwealth Office Minister or official should be that foreign policy is understandably and rightly perceived in terms of human, civic and civil rights, especially where the position of British citizens is concerned. I quickly learnt that lesson afterwards, when Dr. Sheila Cassidy was tortured by the Chileans and Mrs. Dora Bloch disappeared in Israel, and by spending four and a half years dealing with our relationship with the Argentines over the Falkland islanders. One rightly learnt the lesson that people matter in foreign policy, just as they matter in domestic affairs. Consular diplomacy is as much a matter of profound concern as commercial or grand diplomacy.
If the Foreign and Commonwealth Office is to defend its share of the cake and fight its corner, it has to work on its public image. During my four and a half years in the Department I found that the general perception was not correct. In that large and elite service there were many people who came from more diverse backgrounds than was generally perceived. There is no doubt that the public perception is that of a service that is not in close touch with the needs and wishes of the British people and of Britain.
Secondly, the report asks how, in this day and age, the Foreign and Commonwealth Office determines the British national interest when its 2,500 staff decide how to spend £350 million in overseas posts. The decision was much easier when we had an empire because the scope and nature of our power was evident for all to see—it was part and parcel of the whole ethos. The empire had a proper dimension, which politicians and Governments of the day could utilise. In a post-imperial society—economically, almost a post-industrial society—it is much harder to identify British national interest. I must draw hon. Members' attention to an interesting exchange when the permanent secretary had a good shot at trying to identify why we should have a post in Uzbekistan. We asked him why and whether it would be of value. He said that it
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would and that we had just received a state visit from the President of Uzbekistan. The permanent secretary thought that he had brought all his gold over in the plane and delivered it to the Bank of England. That was a fascinating illustration of the so-called "British national interest" being defended by our having a mission in Uzbekistan. There will be increasing questioning about the nature and character of our representation overseas as the pressures grow. What is the value of diplomacy in the 1990s and what role does the expenditure of the FCO play?
Not long ago, a British Prime Minister said:
"How horrible, fantastic, incredible, it is that we should be digging trenches and trying on gas-masks here because of a quarrel in a far-away country between people of whom we know nothing."
That was a statement about Czechoslovakia, which is now on the verge of belonging to the European Union. Traditionally, the country was at the heart of European civilisation in the 17th and 18th centuries. Anybody who has been to Prague has seen the wonderful physical expression of the counter-reformation. The Prime Minister expressed that view about Czechoslovakia within the lifetime of a number of Members of this House, and no doubt a similar view was expressed about Sarajevo in 1912 also.
One answer to the questions is in the Committee's report. International issues are now transmitted by television and become issues of public concern and, in themselves, become a motive for action. The United Kingdom's contribution to expenditure on peacekeeping is rising from something like £177 million to £310 million. Again, that aid and expenditure is outside the control and scrutiny of the House. Nevertheless, that has been partly engineered and driven by external events which have often been projected vividly through the media with resulting public and political pressure.
The telescoping of international experiences places consequential demands upon Governments to do something. How many times have we heard this summer, "Why is not the international community doing something about Rwanda?" I do not think that we have a post in Burundi or Rwanda in central Africa, but suddenly a faraway place about which little was known became a major international issue of profound concern.
The other case for diplomacy which we make in the report—although not necessarily in the way in which it is organised now—is of course the post-cold war situation. It strikes me that cold war diplomacy was comparatively easy in many fundamental respects. Since then, not only has history come back into fashion, but I suspect that diplomacy has come back into fashion in a big way as we interpret and work out a more stable international order through diplomatic and political action.
A 75-year-old man or woman in our constituencies will have lived through two world wars. Churchill said that
"to jaw-jaw is better than to war-war".
"Jaw-jaw" requires diplomacy and political action, rather than military action. As a consequence, there will be a revaluation of the importance of the role of diplomats and diplomacy. It is vital that, in the coming years, the nature and character of, and recruitment to, our British Foreign and Commonwealth Office service matches and reflects needs—not only of Britain—as well as the role which we would expect it to play in an increasingly complex world.
6.23 pm
Mr. Mike Gapes: Many things have been mentioned which I do not wish to repeat, but, in the short time available to me, I shall look at two aspects of the report of the Select Committee of which I am a member.
Reference has been made to the reductions in overseas bilateral aid to Africa. Paragraph 38 of the report makes it clear that that is a serious problem. This country's bilateral aid to Africa is to be reduced by £60 million, or 17 per cent., between 1994–95 and 1996–97. Significantly, the report also points out that there has been a reduction of 8.7 per cent. in the number of diplomatic personnel in Africa since 1989.
Hon. Members have talked about Rwanda and Burundi, and we could draw similar parallels with other countries in west Africa and the horn of Africa, and potentially even in southern Africa and the Maghreb region, where events could have profound political consequences for the European Union, this country and the rest of the world. But we will be relying—in francophone Africa in particular—not on our own intelligence, contacts and diplomats, but on information that is provided by other countries. That is not the way in which a permanent member of the UN Security Council should behave in the future.
During the questioning of the officials from the Overseas Development Administration and the Foreign Office who came before the Committee, Mr. Vereker said that
"we shall be able to play a rather less substantial part in the development of the African economies."
What does that mean in terms of the infrastructure that is forgone, water supplies which are not provided and lives which are lost in poor countries with the poorest people in terrible conflicts or in areas of drought and malnutrition? The Committee was told by Sir David Gillmore of the Foreign Office that increasingly our diplomatic representation is trade-driven. It is all very well for this country to have the best possible people in our missions in Asia and elsewhere, where there is expanding economic potential. But if we see our foreign policy and diplomatic representation solely, mainly or to a considerable extent driven by economics and we do not take account of politics, we can get into serious problems.
There is a danger for this country. If we are to have the diplomatic service and the weight in the world which goes with being a permanent member of the UN Security Council, we must say loud and clear that that has costs. It is important that we provide resources so that we are in touch with developments in all regions of the world and in all potential areas of conflict.
The UN Secretary-General, Boutros Ghali, pointed out to members of the Foreign Affairs Committee at lunch today that a world of 184 member states of the UN requires us to have a much higher level of diplomatic representation and involvement than in the simple days when the UN was established and there were 40 or 50 states. If this country is, to quote the Foreign Secretary, to "punch above its weight", we must make sure that it has at least a certain amount of weight so that when it does punch, it does not topple over and fall on its face.
The slimming down of the Foreign Office and of our overseas development aid has political and economic consequences, not simply in other countries but in terms
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of Britain's standing in the world. I agree with the right hon. Member for Guildford (Mr. Howell), who said that we need to re-examine our aid policy. But, in my view, that re-examination should not be on the basis of trying to challenge or reduce the welcome increase in commitments to the UN or to multilateral aid programmes, although the scrutiny and the democratic accountability of those commitments—particularly through the World bank, and with the European Union and Parliament having a greater say—should be improved. The real answer is not to run down or hold back multilateral aid, but rather to recognise that, proportionally, this country spends just 0.31 per cent. of its gross domestic product on aid in comparison with Norway, Sweden, Denmark, the Netherlands and other European countries which exceed the United Nations aid target of 0.7 per cent. In fact, Norway spends 1 per cent. of GDP on aid.
This country should be at the forefront of the contributor countries. Our young people are concerned about the atrocities, bloodshed and starvation suffered in countries as widespread as those in the middle east, Europe or Africa. I am sure that, in time, those young people will influence politicians and make us raise our eyes above the immediate to the future of the continent and the planet.
The response of the Foreign Office to our report is regrettably inadequate in a number of respects. Next year, I hope that it will give a more detailed response to the many recommendations that we will make.
6.30 pm
Mr. John Denham: I congratulate the Select Committee on Foreign Affairs on its report, but I should like to draw attention to an issue that should command more attention from the Committee in the future—effective scrutiny of our expenditure on the World bank.
The Committee's report reveals that the underlying level of support to the World bank has grown to about £200 million a year. That is less than Britain's expenditure on bilateral aid or that given through the multilateral channel of the European Community, but it would be a mistake to think that the influence exerted by the expenditure of the World bank can be judged solely by the amount given. The money spent on developing countries by the World bank group has significantly greater leverage than that spent through our bilateral aid or aid from the European Community.
Those who have met people from developing countries can confirm that they rarely talk about the defining influence of British bilateral or European Community aid; rather they frequently speak about the defining influence and impact of the structural adjustment loans from the World bank and those given by the International Monetary Fund. The way in which projects and macro-economic policy, including trade policy and public expenditure, are developed is the dominating influence in many developing countries.
To concentrate on the poverty focus of the British bilateral aid programme or that of the European Union aid programme makes little sense if the overriding effect of the World bank's structural adjustment policy is cuts in health and education expenditure. The World bank's own report on the impact of its structural adjustment policy in Africa has already identified that problem.

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The role of our Government in the World bank should be subject to more effective scrutiny by the House than that currently offered. The World bank group recently launched an astonishing attack on Oxfam and other British non-governmental organisations, but we have no way of knowing whether that attack was agreed by the United Kingdom's executive director to the World bank. Was it made on the instruction of Ministers from the Foreign Office and the ODA? Were they consulted about whether British taxpayers' money should be used to launch an attack on our most respected NGOs? The truth is that the House has no effective control over or scrutiny of the work of the British executive director. We do not know what instructions that person receives from our Government.
We lag a long way behind countries such as the United States, Canada, Switzerland and Germany, which have established different but effective methods of regular parliamentary scrutiny of the role of their executive directors within the World bank group. In due course, I hope that the Select Committee on Foreign Affairs will find time to consider our ability to scrutinise effectively our representation at the World bank. I hope that it will consider whether that representation should be the subject of an annual report and regular monitoring by the Committee, to be followed by a regular debate in the House.
6.34 pm
Mr. Tony Banks: I should like to raise a subject that is as important as most of those that we have already discussed tonight—the terrible threat to the existence of the tiger.
I regularly table questions to the ODA about the amount of funds that the Government are prepared to make available to those countries that are desperately trying to preserve their rapidly disappearing tiger populations. In a written reply on 18 July, the then Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs said:
"In recognition of the fact that tigers are endangered, we would be prepared to consider providing support for tiger conservation."—[Official Report, 18 July 1994; Vol. 247, . 30.]
The Minister of State is aware that the tiger is already endangered. At the turn of the century, there were between 80,000 and 100,000 tigers; now, there are just 5,000 tigers in the 14 range states–95 per cent. of them have been wiped out during the course of the century. That is a calamitous state of affairs. So many people in this country and around the world would applaud the British Government taking whatever action they could to help those countries, particularly India and Russia, which are doing their best to try to preserve their tiger populations.
Tigers are disappearing so fast because of illegal poaching. The Convention on International Trade in Endangered Species, CITES, has made it illegal to trade in any tiger products, but that trade still goes on. One must point the finger at the country that is primarily responsible for that trade—China. Because of its demand for tiger bone products and other parts of the tiger, China is almost solely responsible for the decline in the tiger population.
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Hong Kong, South Korea and Singapore are also assisting in that dastardly scheme. Wherever there is a Chinese host population or a Chinese expatriate community, there is a demand for tiger products, which is unfortunately leading to ever increasing poaching of that magnificent creature. Even in London, if one visits Chinese pharmaceutical shops in Chinatown, one can buy tiger bone products. That is lamentable, because we could do so much to enforce the CITES ban ourselves. It should be our responsibility to set an example.
The British Government could do many things to stop the decline in the tiger population. For example, they could offer support to Russia, which is attempting to preserve the Siberian tiger. India has already rightly demanded assistance from us. In the past, politicians from this House—we mentioned some of their names earlier—visited India to shoot tigers. Can we imagine anything worse? People went there just to take pleasure from shooting tigers. Such hunting was partly responsible for the decline in tiger population.
Although people no longer shoot tigers and put their heads on the walls of their homes, tigers are being poached to provide products with spurious claims about providing greater potency among males. I should have thought that, with a population of 1.3 billion, the last thing the Chinese would want is males with greater potency. It is also claimed that tiger products can help to heal wounds. That may be helpful to a person who has been wounded, but to think that a noble tiger must be killed to provide someone with a plaster is obscene.
The British Government could and should offer material and financial support to those countries that are trying to preserve their tiger stocks. Ex-service Land Rovers would be welcomed by those countries, as would uniforms and field equipment. We might even get something from the peace dividend by asking some of our well-trained troops to assist those countries' various anti-poaching forces. Such help is important and needs to be considered by the Government. I ask the Minister to respond to my request when he replies to the debate.
6.38 pm
The Minister of State, Foreign and Commonwealth Office (Mr. Alastair Goodlad): My right hon. Friend the Foreign Secretary has already welcomed the report by the Foreign Affairs Select Committee on the spending plans of the Foreign and Commonwealth Office and the ODA, and I very much welcome this opportunity for the House to debate it.
As always, the Committee has produced a thoroughly readable, thoughtful and balanced report. It brings much experience and expertise to its work, and we value its comments and its support for the work of the Foreign Office and the ODA. The Government's considered response to the Committee's report has been published as a Command Paper, and has been available to hon. Members in the Vote Office since Tuesday.
I am pleased that the Committee found the content and form of the Foreign Office's departmental report more informative this year. We shall continue to listen carefully to the Committee's views on that. In particular, we are consulting it about the proposed new form of the supply estimates, our guiding principle being that there should be no loss of detail in the expenditure information made available to the House.

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My right hon. Friend the Member for Guildford (Mr. Howell) asked about the intergovernmental conference. As my right hon. Friend the Prime Minister made clear to the House, we attach great importance to ensuring that Parliament has a full opportunity to express its views as the next IGC takes shape. Both he and my right hon. Friend the Foreign Secretary have suggested that the Select Committee might submit its views directly to the study group, which will convene next summer. It will be for the Select Committee to decide how best to do that and who shall put pen to paper. Already I hear cries of, "Author, author."
My right hon. Friend also asked me about the review of the Bretton Woods institutions. The G7 leaders at the Naples summit announced their intention to look at the problems facing the international community in the coming years and see how the institutions that exist—including the Bretton Woods institutions—might best match up to those new challenges. Preparatory work on that is now under way, and the subject will be discussed by the Heads of the G7 Governments at their next summit in Halifax.
The world is changing fast. In certain ways, we are safer now that the cold war is over, but disorder is spreading. Violence and civil war are not confined to Asia, Africa and the middle east, but are tragically present on our doorstep in Europe. Since 1990, 22 new countries have come into being, most in the former Soviet Union and central and eastern Europe, where efforts to entrench market and democratic reforms have proceeded at different speeds and with varying degrees of success.
The United Nations, the conference on security and co-operation in Europe, NATO, the Western European Union and other international organisations have become more active. The UN Security Council passed 18 resolutions in 1989; in 1993, it passed 93. International peacekeeping has been a growth industry. In 1992, 12,000 troops were deployed in UN peacekeeping operations world wide; today, there are more than 76,000.
To protect and promote British interests and security in today's world, multilateral and bilateral diplomacy is needed more than ever before: for negotiation; for the reporting and analysis of events; for maintaining channels of communication; and for lobbying.
On the economic front, protectionism remains an ever-present threat. This year's GATT accord, a significant diplomatic achievement, is designed to check it. We have all become aware—it has already been referred to—of the rapid growth of the Asia-Pacific region, accompanied by its growing political influence. Latin America, too, is on the upturn.
The improvement in Britain's export performance has been at the heart of our economic recovery. The latest figures show that our exports are up by 10 per cent. But the competition is intense. Samsung's decision to create more than 3,000 jobs in Britain is a reminder that this country remains the preferred location in Europe for inward investment, but that position must be competed for.
The nature of overseas development is also changing fast. The UK's aid and development strategy is adapting accordingly. At an individual level, 34 million British citizens travelled abroad in 1993, which is 10 per cent. up on the previous year; and 8.6 million Britons are resident overseas. More than ever before, those people are calling
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on the Foreign and Commonwealth Office's consular services, and last year our posts overseas handled more than 1 million visa applications from the growing number of foreigners wishing to visit this country.
As the Committee has recognised, our security and well-being as a nation and as individuals depends to a substantial degree on what happens abroad. Our interests are best served by a stable world in which we can prosper and live in peace, and our policies are designed to serve that objective.
I should like to focus on the main themes raised by my right hon. Friend the Member for Guildford in his characteristically authoritative speech, and by other Members in the debate. As my time is limited and a number of detailed points have arisen—the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) described them as "free ranging"—I may have to pick up some of the freer-ranging eggs in correspondence.
On overseas development, the major change is the rapid progress and increasing wealth of many developing countries. There is no longer one third world, if there ever was. Instead, we see an increasing diversity. Countries following sensible economic policies have enjoyed rapid growth and increased living standards for their people. That is enormously welcome. Some of those countries are graduating out of the need for aid. One element in that success has been the great growth in private finance to developing countries, as the Committee's report recognises and as my right hon. Friend the Member for Guildford pointed out.
Foreign direct investment in developing countries was around £80 billion last year—well above total official aid. Those countries are increasingly earning their own way in the world. But that development is not equally shared. There are still major problems of poverty and deprivation. A billion people are still living in absolute poverty, most of them in south Asia and sub-Saharan Africa. Private finance is concentrated in a small number of countries in Asia and Latin America. Sub-Saharan Africa misses out almost entirely. Those countries have a long way to go, and will need our continuing help.
British aid recognises that increasing diversity. Middle-income countries still need assistance, filling skills gaps and providing vital know-how to help them on their way. But it is right that the bulk—nearly 80 per cent.—of our bilateral aid should be focused where it is needed most: on the poorest. Those countries need both the finance and the expertise to help develop their infrastructures.
Mr. Michael Colvin: I am grateful to my right hon. Friend for giving way, especially as time is short. On the criteria for overseas aid, may I draw his attention to the fact that, the other day, the Ministry of Defence identified the mismanagement of water and overpopulation as two of the criteria that will lead to flashpoints around the world where hostilities may break out in future? The Indian subcontinent is such an area, suffering from both vast overpopulation and a shortage of water.
Will the Foreign Office have another look at the criteria for overseas aid? It seems odd that, in a part of the world that is currently in receipt of considerable aid, there happens to be gross overpopulation, the mismanagement of water and vast spending on arms. Only the other day, India asked for tenders for 600 155 mm Howitzers. Would

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not that country be better spending its taxpayers' money on tackling the problems of overpopulation and the management of water, rather than on arms?
Mr. Goodlad: My hon. Friend raises an important point. The criteria by which aid is given are kept under continual review. I need hardly say that India is an extremely poor country and a large recipient of aid. The Government make no conditional link between overseas aid and arms sales. There is a separate question whether the level of a country's expenditure on arms is appropriate. Our view is that each country must assess and provide for its own legitimate defence needs. Excessive military expenditure is, however, one of the factors which we take into account when deciding our allocations of bilateral aid.
I was saying that those poorest countries need both the finance and the expertise to help develop their infrastructures, and to support economic reform and good government.
Mr. Rowlands: The Minister is saying how vital the bilateral aid programme is to the poorest countries. Why, then, as is shown in the minutes of evidence, will the allocation of bilateral aid to Africa, for example, fall from £334 million to £284 million? That is a cut, and the Minister has presented it as some sort of marvellous programme.
Mr. Goodlad: I shall discuss aid to Africa in a moment.
We are trying to help those countries to reach the stage where they too can earn their way. I mentioned health and education, and my hon. Friend the Member for Croydon, South (Mr. Ottaway) was right to mention the importance of the Cairo conference on population and development. The programme for action agreed at Cairo sets new standards for population programmes. The programme reflects British Government priority policies of promoting sustainable development through economic growth, poverty reduction and children by choice, not chance. Its impact on the world's people, especially women, will depend on the capacity of national Governments to find new resources and spend them effectively.
Britain has taken a lead in committing extra funds to population assistance—a 60 per cent. increase of £100 million in the next two years. We hope that others, especially European donor nations, will follow suit. In doing that, we draw on the great wealth of skills and experience of British companies, consultants and non-governmental organisations. That effort powerfully reinforces our economic and political relationships with the countries that we help.
Aid is not the whole story. We have worked hard—none harder—for freer trade. The Chancellor's recent proposals on multilateral debt are the latest in a series of initiatives that the Government have taken to relieve developing countries' debt burden, but aid is a vital part of the mix. The United Kingdom has a substantial aid programme. The Organisation for Economic Co-operation and Development review earlier this year commended it for its effectiveness and focus on the poorest.
As the Foreign Affairs Committee and my right hon. Friend the Member for Guildford have commented, on current plans, more than half the UK's aid will be passing
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through multilateral channels by 1996–97. I do not accept the accusation made by some people that aid funded through multilateral channels is necessarily less effective, or "less good", than bilateral aid. The aid programme has always contained a significant multilateral share.
Multilateral agencies can co-ordinate assistance. They can exercise more leverage in support of important objectives such as economic reform. To the recipient—people in the Chamber have at some time or other visited recipients of aid—it is of little consequence whence the help arrives. The key is to ensure that all aid, through whatever channel, is spent well.
Mr. Rogers: Does the right hon. Gentleman accept the argument that, if more and more of our aid, as a percentage and in total, goes through multilateral channels, given the static total aid budget, that cuts the amount available for bilateral aid? Does he accept that that has had the immediate consequence of substantial cuts in aid to Africa and to Asia? As far as multilateral aid is concerned, it seems to me that much more money is going to relatively richer countries of eastern Europe.
Mr. Goodlad: I hope that I have demonstrated that we have been commended by international institutions for giving 80 per cent. of our aid to the poorest. Of course it is true that, as a greater proportion is taken by multilateral aid, a smaller proportion is taken by bilateral aid.
The European Community, which channels more than 20 per cent. of our aid, is a specific cause for concern. That was the prime motivation behind the speech by my right hon. and noble Friend Lady Chalker on 14 June, in which she set out a more structured emphasis on our multilateral aid, including strengthening the working relationship with the European Commission, both in Brussels and on the ground in developing countries, as well as the secondment of staff to key posts in Brussels. Those steps are now being implemented. The results will not be instantaneous, but I am confident that they will gradually bear fruit.
The vital point is to ensure that the UK makes a substantial contribution to the international effort: one that is powerfully in our interest, as hon. Members have said, as well as in the interest of the countries that we help.
My right hon. Friend the Member for Guildford mentioned the European Community aid budget, and whether it should be increasing. The increase in aid passing through the European Union flows from the decisions taken at the Edinburgh European Council. Those reflected the outcome of complex negotiations to balance the interests of all European Union member states. They took into account the agreement reached at the June 1992 Lisbon European Council, that there should be a substantial increase in the resources devoted to EC external policies and, by implication, to the EC's aid programme.
My right hon. Friend the Member for Guildford also mentioned private investment. I agree with him about the importance of private finance. This country is a major provider of private investment in developing countries. In 1992, British private investment has been estimated at about £1.7 billion—about half the EC total. Only the United States and Japan do better.
My right hon. Friend the Member for Guildford also referred to the role of the Commonwealth Development Corporation. The CDC plays an increasingly important

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part in promoting the private sector in developing countries. Its role was endorsed and strengthened in the quinquennial review of the CDC. That agreed revised operating targets for the corporation. The Government fully endorse the CDC's plans to improve its focus overseas and to strengthen its links with British industry.
On the subject of legislation on the CDC, I cannot anticipate what proposals for legislation will be included in the Gracious Speech. On borrowing, the CDC is near its borrowing limits. However, the Government have reduced the rate of interest on the CDC's loans this year, so as to increase its cash flow, and the CDC intends to finance the expansion of activities largely from internally generated funds arising from its portfolio of investments.
The hon. Members for Ilford, South (Mr. Gapes) and for Rhondda (Mr. Rogers) and others mentioned aid to Africa. It is clear that the poorest countries of sub-Saharan Africa will continue to need substantial aid. Africa has been and remains a priority for British aid. About 40 per cent. of our bilateral aid—more than £500 million in 1992–93—goes to African countries. In addition, we are a major contributor to multilateral development organisations, which also treat Africa as a priority. The European Community's aid programme to sub-Saharan Africa for the period 1990–95 amounts to £7.6 billion; the British share is £1.25 billion.
The Foreign Affairs Committee's report, and my right hon. Friend the Member for Guildford today, have focused on the Commonwealth. The Commonwealth has major advantages for Britain. First, we have a common language, a shared history and a shared culture, and Her Majesty the Queen has a special status as Head of the Commonwealth.
Secondly, the Commonwealth is a network. It manifests great diversity in geography, in regional and political links and in economic and social perspectives. That diversity is part of the strength of the Commonwealth. It gives the Commonwealth a valuable and relevant role in this ever-changing world. For Britain, the Commonwealth is an essential link in our international relations.
The Commonwealth has a new task in the 1990s. Good government and democracy cannot be imposed by imperial means; democracy must be home-grown, but we need ways of persuading countries to live by democracy, ways of rewarding them for working democratically, and ways of expressing displeasure if democracy is undermined. We need arrangements that are explicitly post-imperial and non-confrontational, but which can effectively express the views of a country's friends.
The Commonwealth has dispatched 11 election observer missions in recent years. The Foreign Office has contributed 30 per cent. of the costs—rather more in the case of elections in South Africa. The UK is the largest single contributor to Commonwealth funds; 70 per cent. of our bilateral aid goes to Commonwealth countries.
We also recognise the importance of cultural diplomacy, which has been mentioned on both sides of the House. The British Council and the BBC World Service make valuable contributions to promoting British interests overseas.
The hon. Member for Rhondda mentioned the contribution of the World Service and the British Council to our diplomatic effort. The World Service broadcasts more hours, 1,400, each week, in more languages, 38 together with English, than it has in its 62-year history.
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The worldwide audience of 130 million regular listeners is more than double that of its nearest competitor. It has an unparalleled reputation for impartiality and accuracy.
Mr. Ernie Ross rose—
Mr. Goodlad: I have no time to give way any more.
The World Service was excluded from overall budget cuts in 1993–94. It kept every penny of the substantial planned increase in that year, because that was part of the agreed 1991–94 triennial settlement. The World Service was warned long in advance that it would have to bear its share of expenditure cuts after 1994. The World Service funding increased substantially in earlier years; a 60 per cent. real-term increase since 1980. None-the-less, with efficiency savings, the reallocation of resources and increases in revenues, there is room for some new activity in the increased broadcasts to Russia and central Asia, and the introduction of Azeri and Uzbek broadcasts.
As for the British Council, the real-terms reduction in the council's rant in aid reflects the reduction that confronts the FCO as a whole. The council's combination of activities is a British strength that is the envy of our competitors. Japan, France and others seek to copy our model. The council operates in an intensively competitive business sector. Its restructuring has left the organisation much leaner and fitter, and nearly half its income is now revenue from non-grant in aid sources.
The hon. Member for Ross, Cromarty and Skye and others called for a larger aid budget. But of course the Government have to juggle a number of spending priorities. The House would not expect me to pre-empt that process. The Chancellor will announce the outcome of the current public expenditure survey in the Budget next month.
We maintain a substantial aid programme, which has grown by 10 per cent. in real terms since 1987–88. This year's budget is nearly £50 million higher than last year's, at a time when many other large aid donors are reducing their budgets. In 1993, our aid amounted to 0.31 per cent. of GNP—above the average of 0.29 per cent. of all donors.
We remain committed to meet the United Nations target of 0.7 per cent. of GNP as soon as possible, although we are not prepared to set a timetable for doing so—[Interruption.] I am not aware that the Opposition are prepared to set a time scale. The Opposition talk about billions of pounds of increases in public expenditure, but they are not prepared to say where that will come from or how they will finance it. All they do is complain, and I think that people will take their complaints for what they are worth—very little.
My hon. Friend the Member for Eastbourne (Mr. Waterson) mentioned the commercial work of the Foreign and Commonwealth Office in helping British companies break into new markets—the Foreign Office's largest single activity overseas. It is foolish to suggest—as did a writer in the Daily Mail—that the level of exports should be the sole determinant of the number of staff required in each of our missions.
Most of the 83 staff in Islamabad, for example, are there for entry clearance work. At the other end of the scale, the chairman of BP has recently written to praise the efforts of our three-man embassy in Baku, Azerbaijan, where a BP-led consortium has landed a £7 billion oil extraction contract.

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The hon. Member for Rhondda and my hon. Friend the Member for Eastbourne mentioned Hong Kong. The hon. Member for Rhondda also referred to subjects raised in other reports. I take note of what has been said about the desirability of a debate, which will be a matter for my right hon. Friend the Leader of the House and the business managers.
Her Majesty's Government remain committed to implementing the full letter and spirit of the joint declaration, which is the cornerstone of our policy in Hong Kong. We have no reason to believe that China is less committed to the joint declaration. As my right hon. Friend the Foreign Secretary has made clear, we wish to draw a line under our differences with China over constitutional issues.
In his speech to LegCo on 5 October, the Governor of Hong Kong set out a series of constructive proposals on the future Sino-British co-operation over the future of Hong Kong. That was intended to signal—as was my visit to Peking a few weeks ago—our continuing sincere wish to intensify work on outstanding issues during the remaining period of British sovereignty. The House can be assured that we are working hard, both publicly and privately, to achieve the smoothest possible transition, and I know that we have the support of the House in doing so.
The cost of the diplomatic service is a very small part of the £27 billion that the Government spend on defence, aid and diplomacy—just over half a billion pounds. In fact, total FCO diplomatic wing funding, including grants to the British Council and BBC World Service, accounts for less than one half of 1 per cent of total Government spending. That buys 215 overseas posts—down from 243 in 1968.
Britain depends on overseas trade and investment abroad. Exports account for 25 per cent. of our GNP. Inward investment provides 23 per cent. of net manufacturing output. We were the second largest overseas investor in the world in 1993. We have a unique spread of distinctive, worldwide interests, through Hong Kong, South Africa, the Gulf, and the Indian subcontinent, as well as our stake in the European Union and other OECD markets.
The international community holds the key to many vital UK interests—the North Atlantic Treaty Organisation for security; the United Nations for the international rule of law. To promote our vital national interests, we need an effective voice in all the important international organisations, as well as posts in individual countries.
Our distinctive assets—the armed forces, the English language, our financial skills and enterprise, our overseas experience, and the skill of our diplomats, our aid experts, the British Council and the BBC World Service—are admired around the globe. Those assets come at a price, but the sums are tiny compared to spending on health, social security and education. They are what it takes to have a strong, effective foreign policy, promoting British interests around the world, as well as our objectives of peace and prosperity for Britain, promotion of exports and security for British citizens abroad.
There are always a few commentators who cling to myths and stereotypes. They are the voices who criticise our diplomatic effort as if the purpose of our foreign
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service were to serve our vanity as a nation. Those tend to be the same voices who criticise our aid effort for supposedly serving the vanity of foreign dictators. I doubt that there was ever much truth in those propositions; there is certainly no truth in them now.
Our diplomatic service is fit, lean and streetwise. It is working to clearly defined objectives that serve the interests of our country in measurable and tangible ways. As the struggle for power, trade and influence grows more and more intense, we have to make sure that we do not cede an inch of ground to our competitors. Of course, as the Committee has said, there is always scope for improvement, just as there is in the way that we run our substantial aid programme. But, here too, we are setting a world standard for effectiveness and value for money.
Power and influence do not drop into our laps—they have to be worked for. Running an active foreign policy is partly a matter of political will power. But, to deliver the goods, our foreign policy also needs a solid commitment in terms of manpower and resources. Together, those two ingredients have helped us to carve for Britain a uniquely valuable role and status. That is what the British people expect from the British Government. We will not betray that
trust.

Innovative and Competitive Technology
7.6 pm
Sir Giles Shaw: I welcome the fact that the Chancellor of the Duchy of Lancaster is here. I know very well that he has many matters pressing on his attention. I also welcome my hon. Friend the Member for Harrow, West (Mr. Hughes). I suspect that he will undertake his baptism of fire towards the close of the debate. I welcome him to his office of Parliamentary Secretary and trust that he will have a fruitful partnership with the Committee in developing the policies to which the Government have set their hand.
I am sure that my right hon. Friend the Chancellor of the Duchy will not mind if I add my warm respect for the work that was done by his immediate predecessor, my right hon. Friend the Member for Bristol, West (Mr. Waldegrave), who is now Minister of Agriculture, Fisheries and Food. It was, after all, the Government's initiative that created the Office of Science and Technology and thus brought the Committee into being. For that reason, my colleagues and I have double thanks to offer.
We should place on record the fact that my right hon. Friend the Member for Bristol, West was able, in a relatively short period of office, to preside over substantial changes in the way in which science was treated at Government level. During his time in office we witnessed the enlargement of the role of the chief scientific adviser, the development of the director general of the research councils, the alteration of the research councils and their remit, and the first publication, in the "Forward Look", of a White Paper that clearly outlined the developments for science and technology and the role to which the Government were determined to set their hand for the future of British science and innovation. That is a thoroughly worthwhile achievement.
I trust that my right hon. Friend the Chancellor of the Duchy will recognise that we wish to build on those substantial initiatives, and on the developments that are consonant with an increasing commitment showing that the OST is here for keeps. It is the development that best co-ordinates public sector science with private sector requirements. I hope that it will eventually produce, through its policies, a substantial increase in the nation's commitment towards scientific endeavour, innovation, investment in research and a consequential improvement in economic performance.
Hon. Members are grateful to the Leader of the House for allowing us the time to debate the Committee's report this evening. The report is a substantial effort by a Committee that has dedicated itself to investigating, in a relatively short time, significant issues affecting scientific and technological development.
Committee members were aware at the outset that the Select Committee in another place had already dealt with innovation in industry and published a significant report in 1991. We took that not as a disincentive but as an encouragement to build on that initiative to broaden science and technology, and innovation in particular. We felt that they were hugely important to the country.
How grateful I am that Committee members acted as one in that endeavour. We were grateful to the team of advisers who guided us to the report—Professor Ivan Yates, Gerard Fairclough and Professor Michael Gibbons
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and his excellent team at the Sussex science policy research unit. All colleagues and advisers helped to achieve drive and unanimity on the subject. It is accepted by hon. Members on both sides of the House and by people throughout the country that the science base in the United Kingdom is exceptionally fertile and well regarded, that it has developed effectively both within and without the Government service and that it has been regarded world wide as being of great distinction.
However, in our first report, into the workings of the Office of Science and Technology, we realised that the problems went wider than the science base. The evidence to the Committee at that time showed that, for a wide variety of reasons, there was a need to develop innovation and technology that matched the excellence of British science. That is probably the key reason why we felt it correct to dig deeper than perhaps our noble colleagues had done into the reasons why innovative developments in the UK, despite a fertile industry and a very fertile science base, had been so disappointing when compared with competiti e developments in other countries.
The fact that the science White Paper "Realising our Potential" had stressed so obviously the importance of science and technology to industry, and the fact that it had announced new arrangements to make research councils and universities more responsive to industry's needs, encouraged Committee members to feel that the time was right to match that up with research into industry's problems and the scale of development and innovation that the country had achieved.
Although the White Paper was encouraging and although the Government were right to entitle it "Realising our Potential", the Committee's subsequent inquiry into the routes through which the science base is translated into innovative and competitive technology showed that, even though improvements could be made, the science base was already relatively responsive to industry. Industry was able, as many companies were, to get the scientific input that they needed, at the time that they needed it, and of the quality that they needed.
The real problems, however, were much wider and deeper. In many cases, UK industry appeared unprepared to make use of the resources of the science and technology base. Perhaps it was from ignorance; perhaps it was from industry's own short-sightedness, but, worryingly, there were many reasons why the UK's innovation record was internationally uncompetitive. The Committee believed, therefore, that a policy to encourage innovation could not be narrowly focused purely on the science base.
We might reflect at this point that the position of British industry—let me call it British manufacturing industry for the purposes of the debate—has been perceptibly, and some people would say substantially, in decline in recent years. It is not surprising, therefore, that the pressures of having to survive in a pretty ferocious economic environment have made it difficult for countries to set aside the commitment, both in cash and in people, to investigate and to develop innovatory technology for the markets in which they competed.
During those times, one had to consider inflation rates and the fact that it was relatively difficult to obtain capital to make profitable investments. There is no doubt, however, that, against that background, there has been a substantial diminution in what we should call with some pride manufacturing culture. The consequence of that has been a diminution of interest in, let us say, engineers

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becoming engineers and graduates seeking to earn their money in the industrial climate, and a general resistance to the smokestack image of manufacturing processes, an image that has, happily, been largely eliminated and that has done no great service to industry.
The Committee was convinced, therefore, that policies to alter attitudes and activities in relation to innovation and technology would be effective only if they were shaped by knowledge of the innovation process and if all the factors promoting or hindering them were recognised. Accordingly, the inquiry was intended to be a major review of the subject. I suspect that that is why it lasted 18 months. In addition to holding 14 sessions of oral evidence and considering more than 160 memoranda submitted by interested parties, the Committee conducted its own research. It commissioned research into six industrial sectors—pharmaceuticals, aerospace, automotive products, food and drink, machine tools and office electronics.
The Committee chose the science policy research unit at the university of Sussex to conduct the research. Professor Gibbons and his team were able to design a substantial questionnaire that produced a great deal of response on the use by industries of the science base, their investment in innovation, their skilled personnel requirements and their ability to raise the money needed for further investment. In addition, the Committee visited both Germany and Japan to see at close and at far hand the way in which those two highly effective economic giants performed in relation to innovation and technology.
Although the particular sectors that we researched varied widely in their needs and in their relative successes, the overall picture that we gained was pretty gloomy. In the past three or four decades, the UK has fallen behind comparable-sized countries in the amount spent on research and development both as a percentage of gross domestic product and as a percentage of patents on the international market. The Committee was forced to agree with one of its witnesses that
"the UK has tended to under-invest in R and D".
There is no doubt that that has been the case.
The Committee said in its report:
"In the course of our inquiry we have come to believe that unless reforms are urgently undertaken the United Kingdom will remain less able to exploit science and technology than many of its competitors. There is no one reason for this; rather it is the result of a set of interactions between the education and training system, the organisation of industry and the operation of the financial system, all of which are strongly affected by government policies and the state of the economy."
That will come as no surprise to hon. Members on either side of the House.
In part, the problems identified involved a culture that failed to reward adequately those people engaged in industry and, in particular, science and engineering. There was no question but that the rewards for those going into the sciences or engineering in Germany or Japan were substantial. I might add that their social stature was considerably enhanced by their so doing.
Colleagues will recall that in Germany, the status of a doctor of engineering commanded a great deal of acceptance at any level and was certainly equivalent to that of a physician or banker in this country. In Japan, in what I think was an aside, a member of the Toyota
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company said, "We call all our workmen 'engineers' here, at whatever level they operate." Therefore, we are up against cultures which have been established on ground which should still be fertile here but which now is not bearing sufficient fruit.
Industry has indeed recruited engineers but the result has usually been that scientists or engineers tend to remain within their specialities. Few join upper management or reach the general management of their companies and therefore they do not have the ability to gain the high salaries available in industry to those who manage enterprises.
The Government's response to our report stated that there was
"no firm evidence of a current shortage of science and engineering graduates to fill specialist posts."
I agree, but the response misses the point entirely. We are concerned to get the scientist and the engineer into mainstream management, into finance and the City so that they can perha s bring more orthodox attitudes to bear on industry's need for cash for research and on the way in which high risk should be something to which City advisers should respond. We need scientists and engineers in general management. We need them to lead our companies and to bring the disciplines that they have acquired in their specialities to the running of those companies.
Moreover, the lack of scientists and engineers in management sits ill with the fact that, even during the recession from which we are now—thankfullye—merging, nearl half of the companies that responded to our questionnaire had experienced skill shortages, and the majority expected similar problems to arise in the future.
We were forced to conclude that the financial system in the United Kingdom produces a culture that appears to be risk averse and inclined to rely too heavily on short-term measures. I am sure that short-termism will be one of the themes taken up by colleagues in the subsequent debate. One of the problems is that it is quite rational for those who work in the financial world to take the views that I have outlined but to do so can have a very destabilising effect on industry. We welcome the industrial finance initiative study that started when my right hon. Friend the Member for Loughborough (Mr. Dorrell) was at the Treasury. We also welcome Budget initiatives such as the enterprise investment scheme to encourage small and long-term investors in this process.
I sincerely hope that such schemes will be maintained and developed, but we were of the opinion that attitudes tend to vary substantially within the banking system. Some within the financial system claimed that there was plenty of risk capital available but there was clearly no fertile route through which it could flow to those who really needed it. In many cases—certainly in the clearing banks—it rested on the good will of local management to determine such things rather than on head office deciding that it was a policy worth pursuing.
The financial system and the restriction of technological expertise combine to make industry disinclined to invest in innovation. In Japan in 1991, industry-financed research and development amounted to 2.12 per cent. of GDP as opposed to 0.94 per cent. in the United Kingdom. If Japan is thought to be exceptional—which in many ways it is—let me add that German investment was 1.5 per cent. of GDP and that of France

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1.01 per cent. There are considerable differences between our measurable performance in investment in innovation and that of those with whom we still seek to compete.
The Committee was presented with recent research which appeared to prove that tax incentives for R and D might not only produce greater R and D expenditure than the revenue forgone but, through stimulating such R and D, might significantly increase the rate of economic growth. We thought that that was an important point to record in our report and the Committee thus recommended that, in the light of this evidence, there should be a major re-examination of the case for fiscal incentives for investment in R and D. It was disappointing that the Government in three lines—I suspect that that was their shortest comment on any item in our report—decided that such a reappraisal was not to be undertaken.
However, we did not want a commitment; we simply thought that it was reasonable for us to make a suggestion and leave it up to the Treasury to take the rash decision to do a little bit of research to see whether the results might lead to better innovation and better economic growth. If that is the way in which the Treasury is to lead our scientific and technical development, I suspect that the policy of mortmain cannot be far behind.
The Committee accepted that many of the problems involved in providing a fertile route for science to bring a competitive innovation into industry were beyond the power of the Government to solve. However, it was clear that the Government intend to take the lead in tackling many of those problems. The White Papers on "Realising our Potential" and on competitiveness show a welcome appreciation of the value of industry. The Government's response to our report is welcome in many respects. We note that many of the Government's recommendations coincide with ours or, to put it another way, that the Government are prepared to agree with many of our recommendations. However, some of the Government's responses cause us concern.
The first of the Government's responses on which I shall comment is in paragraph 11, which deals with the Department of Trade and Industry. I noted with some apprehension the way in which the new departmental restructuring has taken place. We commented on the failure to replace the chief adviser on science and technology, but we were informed that the post is being discontinued for the reason stated. The Government state:
"A recent Departmental restructuring has brigaded his Division with the Sector Divisions under one Deputy Secretary Industry Command."
I was beginning to think that perhaps the President of the Board of Trade had gone back to his flak jacket and was seeking to instal a military system in the DTI. No doubt he will shortly be leaving his office and cascading through the country rather like Sennacherib:
"The Assyrian came down like a wolf on the fold,
His horses, his chariots, his teeth filled with gold".
We wish him well if the result is greater innovation, but we can hardly accept the language used.
Paragraph 12 of the Government's response deals with another important issue. In paragraph 332 of the Committee's report we dealt with the form of identifying and maintaining the wider knowledge base that industry requires. The Government's response was:
"In the Government's view, it is for industry to identify and maintain the expertise it requires."
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The reason for our demanding—or seeking to provide—that the Government have a role in maintaining the science base was to ensure that the distribution of scientific endeavour leading to innovative technology can reach the places which the larger initiatives do not reach and, in particular, to protect its use for smaller and medium-sized enterprises which the Government, through the DTI initiatives and the business link scheme, recognise as essential for the collective development of better industrial activity in this country.
Therefore, I found the Government's response unsatisfactory. It also appears to conflict with the response contained in paragraph 25 of the Government's report, which agrees with many of our comments in support of collaborative research. It states that the DTI recognises the importance of technology generation but that its efforts would be best directed at
"encouraging companies, particularly small and medium-sized enterprises … to improve best practice and use new technology more effectively."
That seems to be an inconsistency in the report. Perhaps my hon. Friend the Minister will comment on that when he winds up.
We also noted—I have dealt with the matter of general tax incentives—the Government's response at paragraph 21:
"On the Committee's point … about the lending decisions of the banks, the Government has been informed by the banks that they are seeking to base their lending decisions primarily on the basis of the quality of the proposals being considered, and are making efforts to adopt a more systematic approach to risk assessment."
The Committee will certainly welcome that. There is, however, much evidence that small businesses are far too often locked into mortgage-related arrangements with banks, which have brought real distress for the families and have created the impossibility of getting out from under their problems in a humane and generous manner. The developments hinted at in paragraph 21 should be acted on pretty urgently.
My next point on the Government's response relates to paragraph 57. We were talking here about Government laboratories. The Government said:
"It is not evident to the Government that the value of Government Research Laboratories depends on their ownership, and indeed, their effectiveness and the efficiency with which they use their resources in response to industrial needs may well be greater if they operate under the commercial disciplines of the market."
Our concern is that the Government should be responsible for the preservation of the base of scientific knowledge and at least ensure that, at the current level of expenditure, it is preserved or enhanced. On the whole, the Government have been disinclined to make provision for that. I should like my hon. Friend the Minister to express a view on that issue.
I concede that, all in all, the Government's response to the Committee's report is generous in that many of our proposals have been accepted. I also welcome the fact that the direction in which our report is set is one that the Government strategically find convincing. Our debate now, however, will range over many issues that are far from satisfactory. There is great dissatisfaction because we know that many industries are in need of assistance for innovative technology, yet are unable to manage it, to find the finance for it or to develop the techniques that they really need.

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We have recognised that the productive qualities of British industry are just as great as they ever were. Indeed, in recent years, British industry has improved enormously in international competitiveness. The sector is ripe, therefore, for a new and substantial step forward not only in efficiency but in technology, and not only in technology but in innovation. It is now that the Government must ensure that the initiatives that they have set in train and the Committee's initiative in comparing how innovation takes place here with how it takes place in other competitive countries lead to an increase in effort and not to a diminution in Government expenditure or Government commitment.
It has always been the case that the Government have a huge role to play in the nation's research and development. Public sector investment is substantial and nowhere more so than in the Ministry of Defence. It is equally true that the Ministry of Defence has, over many years, provided a significant spin-off for civil use in a wide range of industrial applications, but we all know that the role of the Ministry of Defence has been reduced. We all know, therefore, that the requirement of the Ministry of Defence will be reduced and we all know, therefore, that the amount of development through research and innovation in Ministry of Defence activities will also be reduced. If we have that reduction, we must compensate for it by a wider generation of innovative technology springing from our existing science base through industrial application. That is the challenge to which, I trust, the Government will respond.
7.33 pm
Dr. Lewis Moonie: I unreservedly welcome the report. It will be an invaluable contribution to the debate that we are about to have on innovation and the regeneration of our industry. I also welcome the Minister to the Front Bench and I hope that he lasts a wee bit longer in the job than his predecessor did. I am sure that he will find his new job very interesting and quite a change from some of the things that he has done in the past. Perhaps he will show the same interest in developing his scientific knowledge as the former Chancellor of the Duchy of Lancaster did with his much reported investigation of the Higgs boson and various other arcana of the scientific world. I shall await his comments with interest.
The report, valuable as it is, must be set against the background of a country coming out of an extremely painful recession, which has, once again, seen a contraction of our manufacturing base. It should be obvious that the more the base contracts, the more difficult it becomes to regenerate growth thereafter. The report is, therefore, all the more important and timely as it comes against that background.
Equally, we have the background of Government action over the same period—or should I say Government inaction? Over 15 years, the Department of Trade and Industry has cut its budget of support for industry every year. The Government are fond of saying that they will do something; sadly, they rarely get round to doing it.
The report covers one of the key areas of economic and industrial development—the interface between our science base and industry. British science is the best in the world. All of us here would give ourselves a pat on
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the back and agree to that. However, that in itself is not sufficient, because if we really want to build a prosperous future and if we really want to provide the money that we shall need to improve the things that we all want to improve—health care, education, our infrastructure, pensions and benefits—we shall have to improve industry's ability to utilise and to benefit from the ideas that we generate in our research departments.
The gap between inventiveness and application is nothing new; it was first recognised in the mid-19th century and has been commented on repeatedly since then. The Labour Governments of the 1960s attempted to redress the balance with the Ministry of Technology and the Department of Economic Affairs. That neither was an unqualified success is a matter of historical fact. Perhaps the tragedy was that both were ideas ahead of their time.
We should compare that record with the record of the DTI. On the very day that the science White Paper "Realising our Potential" was published, the Department announced the abandonment of its advanced technology programme. Every year, we have seen supposedly new advances in support for technology and support for industry being developed with a great flourish—fancy papers and advertisements on television. Each time, there has been a repackaging of less and less cash.
I have said that I welcome the report. I shall single out one or two of its most important features for comment. The Select Committee recognised the need for the Government to play their part in assisting industry to identify and carry the innovation it needs through to production. Were that statement alone to be accepted and acted on by the Government, it would be a significant change in their attitude towards industry.
The complexity of the innovation process is properly identified and due tribute is paid to the pioneering work of those in the Economic and Social Research Council who have carried much of the work forward. As the Chairman of the Committee, the hon. Member for Pudsey (Sir G. Shaw), has just said, the case for Government support for research and development through enhanced tax credits is made. Frankly, I cannot see how the Government can still refuse to recognise the value of such a system in the light of the work of Bronwyn Hall in the United States. How much evidence do they need?
As the Chairman said, the Committee is not even asking for the Government to implement the scheme. It is only asking them to look at it again in the light of the present evidence. Surely that is not too much to ask. I sincerely hope that tonight the Minister will withdraw the comments made in the Government's response to the report and will say that they will go ahead and at least examine the case for looking at research and development credits.
Much emphasis is placed on the importance of creating effective technological databases, both local and national, and the provision of technological consultancy services for small and medium-sized enterprises—something which I have long been in favour of. I feel that appropriate reference in the conclusions and recommendations to the crucial role of our telecommunications network might have been appropriate and might have enhanced what is otherwise an excellent report.
Action is needed to create information super-highways in this country. They are needed to implement the proper use of the databases that the Select Committee is talking

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about. Our present approach to telecommunications is a guarantee that other countries will bypass us in the race to develop proper broad-band communications. [Interruption.] I welcome the hon. Member for Boothferry (Mr. Davis), the former Parliamentary Secretary, Office of Public Service and Science, to his place on the Front Bench. I am amazed that, with his onerous duties in Europe, he has time to idle here for a few hours to listen to our debate, but he is welcome none the less.
The report underlines the importance of independent research and technology organisations, and points to the significance in Germany of the Max Planck and Fraunhofer institutes for basic and applied research respectively. Again, I feel that we need to re-examine the possibility of developing a similar system in the United Kingdom. How else are we to take full advantage from, for example, the technology foresight programme? That is surely one of the key reasons for our chronic failure to innovate in this country. Applied and near-market research cannot be left to the vagaries of our short-termist industrial and financial sectors.
Apropos short-termism, I am glad to see that the need for effective sources of long-term funding for small and medium-sized enterprises was also given prominence in the report. We must remember that our crucial deficit in the industrial sector is in the middle-sized companies—which we hope that small companies would grow into. That is the crucial lack in Britain's industrial manufacturing sector. One of the key reasons why we do not produce more medium-sized companies in this country is the critical shortage of long-term, secure finance to fund expansion and development. Chronic financial constraints on growth, as well as a lack of technological know-how, undoubtedly inhibit the organic growth of companies. I hope that, at last, the Government will consider doing something about it and not merely confine their response to accepting what was said in the White Paper.
That brings me neatly to my last point: the response of Government to the report. There is a fair old collection of platitudes in the Government's response, which is only to be expected. The Government will, of course, tell us that, in advance of the Budget, they cannot possibly make any concrete proposals that might ost any money. But I do think that they might have tried a little harder than they seem to have done in their response to the report. It is one thing to accept and say, "Oh yes, you are right," and, "Oh yes, we agree with that." It is quite another to say, "And we are going to do something about it."
Sadly, there is a wee hole in the Government's response, which clearly indicates that they have no intention of doing anything about the report. They hope that, like so many Select Committee reports, it will be quietly buried after it has had its stock debate for three hours on the Floor of the House on an otherwise fairly empty Monday evening. That should not be their response.
There are so many things that I could mention, but perhaps the most obvious point has already been mentioned by the Chairman of the Select Committee: the three-line rejection of the consideration for the case for general tax incentives. I was also disappointed with the
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Government's response on their own research institutions, particularly in view of the editorial in the New Scientist this week, which said:
"According to government figures, by next year departments will be spending a staggering total of £620 million a year less on research than they did 10 years ago …
Next year the Technology Foresight Programme should bring this problem into sharper focus when it identifies commercially valuable areas of research for the country to invest in. But invest what?"
Where is the money to come from? Government spending on research is being cut year after year—not just the budget for the Department of Trade and Industry, but other areas of research as well. It is the seed corn for future industrial development in this country. We cannot afford to cut investment in that area, which, it seems, the Government wish to do. So the self-congratulatory note of the response to the report leaves me a little cold.
I found paragraph 39 of the report particularly galling. It says:
"The UK Government has played a leading role in negotiation of the Fourth Framework Programme for EC Research and Technological Development."
They certainly did. They spent about two years trying to cut the total sum that was to be spent on research, and congratulated themselves on having done so. Having cut spending on research in this country, they congratulated themselves on having managed to cut it in the European Community as a whole as well. That is scarcely something which I would want to boast about. It is a monumental piece of cheek to claim that they have played a leading role in the negotiations when the role was entirely negative.
The report is an important contribution to the debate on the future of Britain as a successful manufacturing nation. I trust that, in his response tonight, the Minister will show that our Government intend to do more than just take note of the proposals. I fear, however, that they will not and that it will be left to the next Labour Government to begin the process.
7.45 pm
Mr. Robert Jackson: I join other hon. Members and in welcoming my right hon. Friend the Chancellor of the Duchy of Lancaster and my hon. Friend the Parliamentary Secretary to their new positions at the Office of Public Service and Science. They have inherited a curiously assorted collection of responsibilities. Of those, their responsibility for science is probably the most esoteric, but it is also probably the most important and, I believe, the most vulnerable. I hope that they will ensure that it gets a full share of their attention. I wonder whether in time they will come to feel, as I think may prove to he the case, that it was a fundamental mistake to shift the responsibility for the research councils away from the Department for Education. Meanwhile, as they attend to science, they can be reassured by the encouragement and support of the Science and Technology Select Committee. It has indeed produced, for its first report, a weighty document which is full of both detail and good sense.
We are at the beginning of a new era at the OPSS, at both ministerial level and the highest official level. I take this opportunity to congratulate Richard Mottram, the superb founding permanent secretary of the OPSS, on his new appointment to the weighty office of permanent secretary at the Ministry of Defence.

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As the OPSS is at the beginning of a new era, I hope that my hon. Friends and the House will forgive me if I pitch my speech at a level that is more of philosophy than of detail. In that, I will follow the excellent speech of my hon. Friend the Member for Pudsey (Sir G. Shaw). What I have to say runs counter to much of the current orthodoxy in this area, but I know that Ministers have a taste for the battle of ideas, and I hope that my remarks may be lodged with them as a valid counterbalance to much of the thinking that will surround them in their offices.
Let me express my thoughts in a serious of propositions. First, basic science is necessary for the health of an advanced economy such as that of Britain. By "basic science", I mean science that aims at a theoretical pay-off, rather than at any clearly perceived utility. Fundamental science—what the jargon calls the "science base"—is vital to an economy such as ours because it trains the most highly educated manpower, on which advanced economies depend; because it equips those people to tap into the flow of ideas from the science base both at home and abroad; and because it is the seed bed of innovative technology.
It is important to restate that fundamental proposition, because although lip service is often paid to it, except from time to time by the Treasury, its full implications are not always fully and properly understood, as I hope that I will be able to explain. Historically, as has been said several times in the debate, Britain is strong in basic science. It is one of the jewels in our national crown, but it is not one which we keep highly polished. In its statistical analysis, the Select Committee report does not enter that well-trodden field. However, I believe that it is now well established that our spending on basic science in Britain is relatively low compared with that in the other leading basic science countries—the United States, Germany and France.
My second proposition is that basic science has two intrinsic characteristics which severely limit the extent to which profit-oriented industry can be expected to invest in it. One of the features of basic science is that it has no evident utility at the time it is being undertaken. It develops most effectively under conditions of openness within the global community o scientists, and that makes it difficult for economic operators to appropriate and exploit the intellectual property that i may represent.
From the point of view of science-based companies, basic science is what might be called a necessary externality. In that respect, it resembles many other kinds of infrastructure which must be provided as public goods. That is where we must locate the most important responsibility of Government in science.
Advanced economies around the world have found that the only way to secure a flourishing science base is for the Government to pay for it. In this country, the OPSS has a substantial role in relation to that half of our investment in basic science which flows from the research councils. I suggest to my hon. Friends that that is the responsibility which they must keep closest to their hearts.
With regard to science that aims at commercial and other applications, which is the subject of the report from the Science and Technology Select Committee, I want to state a third proposition. The delicate chain of innovation,
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of which science is only a part, can be managed successfully only by the organisations and companies that have a direct stake in it. They must have a sense of ownership of the process if they are to manage it successfully and, in particular, they must feel wholly committed in the management of that most difficult transition of all—from the laboratory bench to initial market and production concepts.
Innovative companies must obviously have strategies for gaining access to the science base, especially in universities at home and abroad. There is bound to be an extensive interface between the Government-funded area of basic science and the industry-funded area of applications. As in the science White Paper published earlier this year and the Select Committee's report, thought must be given to the way in which that interface is managed. However, the temptation and the danger are that the Government will become more involved than they should, so that the proper boundaries are blurred and industry's sense of responsibility and ownership in the management of innovation is diminished.
It is still too early to say whether that is happening as a result of the changes constituted by the creation of the OPSS. However, hon. Members should watch that point closely, as should my right hon. Friend the Chancellor of the Duchy of Lancaster. We should bear in mind, as an object lesson, the story of the British Government's engagement with science and industry in the 1950s and 1960s.
In those days, under Governments of both parties, the Government were a heavy investor in what is now called near-market research. The Select Committee report has much to say about the applications gap. It refers to the weakness in innovation in British industry. The report does not offer an extensive explanation of the problem, but I believe that much of our present
weakness derives from that period and from the impression it fostered that science is more a matter for Government than for companies.
While there has to be a partnership in that area between the Government, industry and scientists, it is critical that there should be a clear sense of the boundaries between the responsibilities of those different parties. That is why I believe that we were on the right lines in the late 1980s, under the leadership of Baroness Thatcher who had a close personal interest in such matters, when the Government sought to concentrate on their responsibility for the science base and to point industry clearly to its responsibility for profitable applications.
I want now to refer to a point of detail which appears in the Select Committee report in paragraphs 181 to 186. If my analysis is right, one of the implications must surely be that it is better and healthier for Government support for scientific innovation in industry to take the form of tax credits rather than being cast in the form of grants and subsidies.
Of course, public money is involved either way and the Treasury insists, probably rightly, that the public expenditure costs of a grants regime are bound to be cheaper than those of a tax credits system. However, that misses the psychological point that it is better for companies to be encouraged to spend what they see as their own money on R and D than for them to become habituated to the idea that their R and D is basically the Government's business.

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I strongly support the Select Committee's recommendation at paragraph 186
"for a major re-examination of the fiscal incentives for investment in research and development."
As has been pointed out, the Government reject that advice in their note at paragraph 19. I continue to find it odd, although not untypical of the Treasury, that the Government should be so certain on that point when so many other countries, with Governments of the right and of the left, believe that tax credits of the kind called for by the Select Committee have an important role to play.
On another point of detail, the Select Committee report is absolutely right to insist at paragraph 164 that the Government should proceed with care in handling applied science for Government purposes in the Government research establishments. I support the concept of the so-called internal market for Government science and, where appropriate, for privatisation of the GREs. However, the report is absolutely right to highlight the risks that that involves.
In that respect, I have particularly in mind the future of AEA Technology, the great British applied science asset whose headquarters are at Harwell in my constituency and which faces the risk of fragmentation on privatisation. That must not happen and the uncertainty which has for too long surrounded the matter should be ended as soon as possible. I hope that the Chancellor of the Duchy and my hon. Friend the Minister will take a close interest in what the Department of Trade and Industry is doing in that respect.
More fundamentally with regard to the GREs, we must remember that there are two sides to the customer-contractor relationship and the Government must be careful to keep them in balance. They should not rush ahead to create contractors before they have adequately developed their capacity to act as a set of intelligent contractees—a problem which the Select Committee report refers to as the "intelligent customer". There may be a danger that the new research contracting organisations will contract in the negative sense as well as simply being contractors.
Returning to the main thread of my argument, I want now to draw a conclusion from what I have said about basic science and applied science and state it in the form of a fourth proposition. As I said earlier, basic science is vulnerable to a host of takeover bids which I see it as the duty of my right hon. Friends to resist. On the part of industry, there will always be a taste for subsidy, although perhaps not from the best companies. On the part of Government, there is always a measure of impatience for quick results. It must be said that, in the current climate, there is also a desire among academic scientists to legitimate themselves through promoting their claims to relevance.
I saw something of the ambitions of other Departments in relation to the science budget of the OPSS—the research councils' budget—when I was a junior Minister in the Department. On that point, I simply want to repeat what I said in any earlier debate about these matters. I pointed out that any significant shift of Government R and D funding to support what are taken to be business objectives will never be enough to make much difference to business and could have potentially catastrophic effects on the availability of resources for basic science.
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Let me cite some figures to illustrate what I mean. Twenty per cent. of the annual research councils' budget amounts to about £240 million. That sum is no more than 4 per cent. of the estimated annual spend by British industry on R and D. Yet that £240 million covers just about the whole of the cost of the Medical Research Council, on which we spent £257 million last year, or it equates to the cost of supporting all the work done in astronomy and particle physics, at a cost of £190 million, together with the whole of the sum devoted to the Economic and Social Research Council, £53 million.
"Partnership" is an attractive word and an attractive concept, and I used it earlier—I see that the Select Committee has endorsed it several times—but I want to draw the attention of my right hon. Friends to its risks, and in particular to the risk that the direction of fundamental research may be shifted, through the development of the apparatus of partnership, into directions that serve the interests of the industries of today rather than the industries of the future.
In particular, I must tell my right hon. Friends that, although the Select Committee supports them at paragraphs 346 to 348, I think that the jury must still be out concerning the arrangements for technology foresight, upon which the OPSS has now embarked. That will turn out to be either a set of talking shops, which will be costly in terms of high-grade manpower, but without practical effects or, much worse, it will become a mechanism for distorting the organic development of the science base under academic leadership. I hope that the Government will produce a full report on that exercise in due course so that the House can draw its own conclusions.
That same line of reasoning leads me to dissent from the Select Committee's report when it refers, at paragraph 129, to the universities. The Government's response on that point is at paragraph 52 of its note, and, to the extent to which it follows the line taken by the Select Committee, I believe it to be mistaken. The Committee says that it would
"support the initiatives to widen the criteria used in assessing research performance and to increase the status of industrial research"
in universities. That conclusion flows from what I see as the current orthodoxy and it reflects the blurring of the philosophical distinctions which I am attempting to assert.
Contrary to what the Select Committee says, and indeed what the Government think, the Government's policy with regard to the science base in the universities should be to build fundamental science in those universities where that work is best done and to make it clear both to industry and to the universities that it is industry's business to develop and fund appropriate networks with the universities in support of applied research. The danger otherwise is that the Government will end up paying for research which is neither first class as fundamental science nor of any real practical relevance to industry, while first-class, basic research opportunities are neglected and industry is encouraged to go on underestimating its practical interest in building its own links with the universities.
I said earlier that Britain's history of strength in basic science is one of the jewels in our national crown. That position was achieved with much effort over several centuries and it can be sustained only with much effort over a long haul. However, great damage can be done in only a short period of neglect and mistaken priorities. That

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is why my right hon. Friend and my hon. Friend the Ministers have assumed a heavy burden of responsibility in taking on the S part of the OPSS. We all wish them well in carrying it forward.
8.2 pm
Dr. Jeremy Bray: The hon. Member for Pudsey (Sir G. Shaw) has added to the signal services that he has given the Select Committee by his wide-ranging speech, which clearly presented the scope and depth of the report and reflected many of the views which the whole Committee would take of the Government's response and the Committee's disappointment with some aspects of it.
The Chairman of the Committee rightly referred to the services given to the Committee by its advisers, Professor Ivan Yates, Mr. Gerard Fairtlough and Professor Michael Gibbons. They are distinguished men of great achievement in the scientific world. Ivan Yates is a former chief engineer and deputy chief executive of British Aerospace. Gerard Fairtlough is the founding managing director of Celltech Ltd. Michael Gibbons is the director of the science policy research unit, which is the leading and longest-running science policy unit in the country. Professor Gibbons was assisted by Professor Roy Rothwell, whose books on industry and science have been of great value for many years.
With that breadth of advice and the wide range of evidence taken, the Committee sought to come up with an analysis which was to be of value both to people in the science community and to its neighbours in education and in other parts of government. That objective was achieved. The report is beginning to be quoted in conferences and forums which look for objective analyses of the overall situation. I am sure that the Committee's report will stand the test of time.
My hon. Friend the Member for Kirkcaldy (Dr. Moonie) rightly spelt out our criticisms of the Government's science policy. In his capable hands, that criticism will be extended into further practical developments of our own policy over the next two years.
I welcome the speech of the hon. Member for Wantage (Mr. Jackson), whose fulfilment of the duties of Minister with responsibility for science was enjoyable and always stimulating. I agree with much of what he says. It is a great advantage to the House if a Minister or an hon. Member speaks with long experience of and commitment to a subject, and the hon. Member for Wantage has certainly done so over the years.
There has been a change of personnel and Ministers. I echo what the Chairman of the Committee, the hon. Member for Pudsey, said about the departure of the former Chancellor of the Duchy of Lancaster to other duties. He undoubtedly won acceptance by the science community to an extent that totally exceeded the resources in financial terms which he added to it. I am not saying that his acceptability was undeserved; he took an intelligent interest in science and certainly launched some important developments in the restructuring of the research councils which are still being worked out and implemented. Thanks to the right hon. Gentleman's experience of the machinery of government, he was able to carry through changes to the extent that he did, although he lost some important battles in setting up the
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Office of Science and Technology which probably will not be won until we have a change of Government. It was, of course, a direction in development which Opposition Members had foreshadowed in our proposals for the setting up of the Office of Science and Technology, and the fulfilment of those proposals and their further development will be in the hands of my hon. Friend the Member for Kirkcaldy.
After the admirable, wide-ranging and direct speech by the Chairman of the Committee, I should like to stand a little outside the vantage point taken by the Committee and consider the problem from a different point of view:
"Our dissatisfaction with Britain's industrial performance begins when we compare ourselves with our principal competitors. The quality of our manufactured goods is lower than that of Japan. Our record of innovation cannot match that of the United States. The skills of our designers are often outstripped by those of Italy. Our levels of scientific and technical education are lower than those of Germany. The job of research"—
and, one might say, of Select Committees—
"is to find out why those things are so; the job of government is to put them right.
Tonight I want to propose a rather different perspective. When I view my own personal performance, I find the outlook equally depressing. I cannot bat as well as Brian Lara. I cannot write as felicitously as Tom Stoppard. I am not as handsome as Hugh Grant. You may feel that I should spend more time in the nets, improve my writing style, and spruce up my image, and indeed I should perhaps do all these things. But the solution I have found is a rather different one. I know I cannot match Lara's cover drive, but when it comes to calculating a demand elasticity I know that I can beat Lara ninety-nine times out of a hundred. Let Lara face the bowling, while I deal with the economics.
Competitive advantage is based, not on doing what others already do well, but on doing what others cannot do as well."
Those are not my words; they are John Kay's introduction to his recent Economic and Social Research Council annual lecture on the foundations of national competitive advantage, but they put a powerful point of view. Of course, John Kay was one of the advisers to the Select Committee.
What are the things that we are good at as a nation? Surely, one thing is, or used to be, basic science. There is a perfectly legitimate case to be made for that in its own right—the hon. Member for Wantage made the point today—irrespective of its economic application. We need to understand the universe and nature in order to survive. Many scientists reasonably regard their own work and their primary duty as a contribution to that end.
Taking the point of application, however, particularly commercial application, science and research and development have an essential contribution to make and a particular application in Britain. Doing what others cannot do as well does not lead to different conclusions from those reached by the Committee and, indeed, the hon. Member for Wantage. Currently, the test criteria are the contribution to the balance of payments and the avoidance of excessive Government borrowing, given adequate levels of public services and acceptable levels of taxation. For national economic performance, it is no good excelling in the production of formula one motor cars if the consumer taste is for much more massive imports of high-tech Japanese-made consumer goods.
It is argued that manufacturing is nothing special and is a rapidly diminishing proportion of economic activity in an advanced industrial economy. As a country, perhaps we have gone post-industrial somewhat prematurely for the health of our balance of payments. We have ceded to

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foreigners the control and profits of our motor car firms while rightly, in our reduced circumstances, welcoming branch factory investment from Korean electronics companies which have followed the Japanese example rather more successfully than we have. Never mind: it may well be that in the future the proportion of the community engaged in manufacturing and the utilities will fall to less than 5 per cent. in the same way that employment in agriculture has done.
If that is the scope of the application of science and technology, does that mean that the importance of science and technology will diminish in society and perhaps become an activity that can safely be left to other countries? I do not think so. The last wave of technology-generated industries included cars, trucks, planes, oil, gas, electricity, appliances, central heating, radio, television, telephony, petrochemicals and pharmaceuticals. An earlier wave included rail, steamships, coal, coke, steel, gaslight, public health and telegraphy. An earlier one still, which ushered in the industrial revolution, included canals, heat engines, coal and coke again, cast iron and textiles.
It may be that our concept of research and development at the upstream end of a linear process is too closely related to the industries of those earlier waves. The product is first invented; then it is made. What will happen in the industries of the next wave? Commonly included in the list are information technology, biotechnology, health, new materials, environmental restoration and protection. The manufacturing activities of those industries will be small in relation to their total activities, and activities which we would have called research and development in the past will become a much larger part of their activities.
We have already observed that trend in pharmaceuticals, with expenditure on research and development at well over 10 per cent. of turnover. Recently, Dr. George Poste, the head of research and development at Smith Kline Beecham, presented a scenario in which even the giant pharmaceuticals concerns would cease to exist, becoming a complex web of external alliances spread around the globe. In that web will be some of the new breed of biotech companies which have never made a dollar's profit or even a dollar in sales and where all is research and development.
Again, people say that research and development is mainly a long-term investment. In fact, however, 80 per cent. of British Telecom development expenditure is focused on the delivery of projects within the next one to two years. Development is very much a part of current operations.
As for the clearing banks, it has been estimated that smart cards carrying credit will reduce the cost of processing financial transactions to less than one tenth of the present cost; payments will cease to go through the banking system. The nature of high street banking will be transformed yet again, and there will be massive redundancies. Human resource managers in the clearing banks speak of their industry replacing the mining and steel industries as the principal job shedders of the next decade. As the effort to build up personal financial services to replace present high street banking gathers momentum, high-tech finance will move from the corporate to the personal sector with a matching increase in research and development in that service industry.
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In the process of changing the role of research and development within economic activity generally, what happens to the accounting definitions and the research and development figures reported in the accounts will be governed by other considerations. In the future, the mental and physical processes that research and development scientists and engineers go through today will become an increasing part of the overall activity in a firm and in society. Many things, from cars to drugs, will be custom developed and made, with the processes taking place largely within the computer systems used by the researcher-developer-designer.
A consequence of that increasing research intensity is the shortening of the duration of the waves of new technologies, as well as that of individual product lifetimes. It is also a major factor in the need for education and training, and for access to them to continue throughout life.
None of that is to be taken for granted. None of it will happen without a great deal of enterprise and effort. It will all have negative as well as positive aspects. But what is missing in the Government's whole approach to industry, technology, science and social policy is any sense of overall strategy, sense of direction or purpose, and the country senses that they have lost their way.
One small instance of what hon. Members have already underlined is the Government's refusal to examine the case for tax incentives for research and development, as recommended by the Committee. The underlying case is simply that it is impossible to appropriate sufficient of the benefit in much research and development; much of the benefit spills over to other firms and, indeed, other countries. Therefore, firms tend to invest below the level that would be best for the competitiveness of the national economy.
The two papers—by Bronwyn Hall and by Coe and Helpman—which are quoted by the Committee are certainly not the last word, but they are a great deal better than the arguments relied on by the Government's White Paper and the recent ACOST study. The Hall paper outdates the Inland Revenue review of the literature, from which Ministers continue to quote. The Inland Revenue has internally reviewed the Hall paper, but Ministers refuse to publish the new
analysis; I am not sure whether they have even seen it.
The Coe and Helpman paper also sets within a coherent framework the OECD international comparative data on the intensity of research and development, output growth, and so on, which Ministers constantly distort but which at long last the annual review of Government is beginning to spell out in honest terms.
I shall give one comparison in relation to corporation tax regimes. In the United Kingdom, a company with surplus advance corporation tax gets back in tax relief only 13 per cent. of the cost of a marginal increase in research and development expenditure. In the United States it receives 35 per cent., in Germany 30 per cent., in France 33.3 per cent., and in Japan 37.5 per cent. That lower marginal support for research and development in Britain has been a material encouragement for important British companies to build up their research effort abroad rather than in Britain. Furthermore, it is a self-perpetuating phenomenon in that as the profits earned abroad from that research increase, so surplus ACT increases and the incentives to the firm become more deeply rooted.

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We can achieve the general major shift in Britain's competitive position that is needed, with much of it contributed by improved innovation processes, and more use of a greater intensity of research and development activity through the kind of measures that have been proposed by the Committee. A strong position in the science base is more important than ever in securing access to and winning the understanding of the faster flow of new results and in providing the essential well-trained researchers. It requires a shift in the role and perception of Government, of which there is no trace in the Government's reply to the Committee's report.
8.21 pm
Mr. Nigel Jones: What a pleasure it is to follow a thought-provoking speech such as the one that we have just heard from the hon. Member for Motherwell, South (Dr. Bray). I, too, welcome the hon. Member for Harrow, West (Mr. Hughes) to his new responsibilities. When the former Science Minister sat on the Bench I had a flashback to the Standing Committee which considered the Intelligence Services Bill, but fortunately we are discussing something a little more interesting today. I declare an interest in ICL.
I thank the members of the Science and Technology Committee for the excellent report which they produced in April. Clearly, they spent a great deal of time on the report–18 months, as we heard from the Chairman of the Committee. It was time well spent. However, like other hon. Members, I find the Government's response disappointing. One of the reasons why I became a Member of Parliament was that, after spending more than 20 years in the information technology industry, I could see other countries catching up with and overtaking Britain in their standard of living. They did it by investing in the future, not in the short term but in the long term, researching and developing products that might not produce tangible benefits this year or next year but in five, 10, or 15 years or longer down the track. If Britain is to survive as a modern, industrialised nation, the people of which enjoy a high standard of living, we must invest long term, too.
Whole swathes of our industry have contracted. We have heard about some of them, including the machine tools industry, today. The science and technology report identifies the real problem. It is a problem shortly to be exposed in a book entitled "The State We're In" by the eminent journalist Will Hutton. Mr. Hutton gave the inaugural Summerfield lecture at the Cheltenham festival of literature earlier this month and identified the problem as short-termism. Other hon. Members have pointed that out.
The former Chancellor of the Duchy of Lancaster listened positively to the wishes of the science community, but I always felt that he was beating his head against a brick wall in trying to persuade his Cabinet colleagues to invest in research and development. The
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Government's response to the report confirms those fears. We have already heard about paragraph 186 of the report, which says clearly:
"We believe the time has come for a major re-examination of the case for fiscal incentives for investment in research and development, both at personal and at company level. Such a review should be conducted openly, and its conclusions should be considered by experts outside the Treasury."
In paragraph 19 of the Government's response we read:
"The Government does not, however, agree with the Committee that there is a case for general tax incentives for spending on research and development".
The Government are wrong on that point. We need to invest now in research and development of the new products that will create wealth and jobs in the future. Through the tax system we need to make it financially attractive for companies to invest in research and development, as they do in the United States.
For example, it should be more attractive for companies to invest in the future than to pay out excessive dividends to shareholders. The country, the companies and the shareholders all have an interest in long-term investment for the future instead of short-term gain. We have already heard that Japan, the United States and Germany are investing more in the future than we are. That means that they, not Britain, will create the wealth and the jobs in the last years of this century and into the next.
The banks, too, must be more flexible in supporting manufacturing industries that are investing in the future. There is a hopeful sign in the Government's response that the banks may be changing their attitude. Without properly funded research, we will spend even more time in the House in the coming years debating further cuts in social programmes, health, education, police and social services. As I have just touched on the police, is not it a disgrace that the Home Office is contemplating introducing a new formula which, at a time of record crime, would cut the budget of the chief constable in my area of Gloucestershire by 9.9 per cent?
I fear that the Government will put short-term financial issues before the long-term goal of providing for Britain an adequate base to maintain and improve our quality of life not only for our generation but for future generations. Indeed, the strategy of the Government seems to be to cut investment in key services to create enough elbow room for a cut in income tax before the next election. That is not only short-termism; it is cynical short-termism. One person's tax cut in 1996 could be that same person's job loss in 1998.
I came across an example of what is wrong a few months ago. An excellent company, Johnson Matthey, is one of the leaders in environmental technology, which is one of the growing industries. It makes catalytic converters, among other things, and it has recently carried out research into fuel cells, a subject mentioned in paragraph 346 of the Committee's report.
Johnson Matthey is now in a position to start manufacturing the technology. When I asked where it would make the new product I expected the answer to be Sonning, just outside Reading, where the research was carried out. But no. It will make the fuel cells in Belgium because the Belgian Government almost fell over themselves to attract Johnson Matthey to create Belgian jobs and exports for the Belgian economy. That is an

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instance where the Department of Trade and Industry could not keep the jobs and the wealth creation in Britain because it has such a small budget.
Many of the skills learnt in research are those of identifying and better understanding problems, and providing basic knowledge to be used in the future. A potential wealth-creating area may be identified, but will there be resources to make anything of it?
One key area which is regarded by some as likely to have bigger world market potential even than information technology—the field I came from—is biotechnology. Some hon. Members may have seen Dr. Chris Evans of Chiroscience in "The Money Programme" on BBC2 some time ago. He bemoaned the fact that it was likely that the new industry would not get off the ground in Britain because research and venture capital was so difficult to obtain.
Yesterday in The Sunday Times there was a report which should interest all hon. Members. It was entitled "Doctors unlock secret of old age". It states:
"Scientists investigating the development of human cells believe they have unlocked the secret of ageing. The discovery could transform the quality of later life by enabling doctors to delay the onset of age-related illnesses … The research, funded partly by a British company, Biotechnology Investments, was hailed this weekend by international experts, who said that if the promise of early results was fulfilled, it could have profound impacts on the treatment of some of the biggest human killers, including cancer and heart and kidney disease."
Clearly there is still an enormous amount of research to be done in that field, but for the sake of mankind it is research that should be done and British scientists should be involved in it. The research is being carried out in California.
That is why it is so vital for the Government to realise that scientific research is not merely something that one should do. Once proven it is something that should permeate all Government Departments—to the Department of Trade and Industry and through it to health, agriculture and beyond.
The reality, as all hon. Members know, is that funding could be limitless. We can all think of projects that are worthy of investment but would far outstrip the budget of any of the parties in the House. There is a shortfall, however, which is damaging Britain's future.
During our debate on science in February, I mentioned David Ko, who was a lecturer in the department of physics at Oxford university. He was worried about the effects of Government funding policy, which was leading to a reduction in the number of physics graduates. Since that time, Mr. Ko has left what I consider to be his vital job at Oxford, because of the lack of funding, and is working for a merchant bank in the City. Perhaps, as the Chairman of the Committee pointed out, he may bring a scientific bent to the workings of that bank, but he went because it pays better and he no longer faces the pressure of making do with a budget that is totally insufficient for the job that he was asked to do.
There should be a proper career structure for research scientists, with salaries and conditions that reflect their level of qualification, which will keep scientists in Britain and encourage others to become scientists. We need to value our scientists in the same way as they are valued in Germany, France, Japan and the United States. We must also match our competitors in research and development.
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In this month's edition of Laboratory News, the Government's rejection of tax breaks for research and development is greeted with some concern. The Save British Science executive secretary, Dr. John Malvie, condemned the Government's decision as "blind adherence to dogma." He said:
"The Government should at least be trying to match the assistance that other countries give to R&D. Other countries adopt pragmatic approaches and are not bound by dogma in the way this Government appears to be."
I hope that when the Minister sums up he will provide answers to the questions raised so far and especially to paragraph 19 of the Government's response to the Committee's report. I wish him well in the task of persuading his colleagues of the importance of research in this country. If, as I suspect, he and the Chancellor of the Duchy are unable to persuade the Cabinet to invest more now, that is another example of why Britain needs a fresh start under a new Government.
8.33 pm
Dr. Lynne Jones: It is a great pity that the Select Committee report and the report of tonight's debate, in which there has been much consensus on both sides of the House, will not get the attention that they deserve. They are not such good theatre as the performances in the House when we are all at one another's throats, shouting and baying for blood. None the less, I hope that the Minister will listen to the arguments that have been presented and take those back because they are serious and important for our country.
In trying to emphasise the importance of the report I must quote a letter from one managing director to our Committee Clerk. He wrote of the report:
"I have to say that it is the most sensible and thoughtful summary of our parlous state and prescription to reverse our decline that I remember seeing. It is, in fact, quite magnificent in its measured and intelligent insight.
Let it all be done, just as your Committee has set it out, and we can at least plan to put the Great back in front of Britain."
Judging by the published Government response, I think that that correspondent will be very disappointed, but perhaps the Minister can reassure us when he sums up.
The report outlined, as the correspondent said, the parlous state of our industrial and our research and development bases. The United Kingdom was the only OECD country in which total expenditure on research and development declined as a percentage of gross domestic product between 1981 and 1988. Since then, it has fallen further. Research and development data suggest that the United Kingdom has tended to underinvest in research and development costs compared with our major competitors. That problem is even more marked when defence expenditure is excluded.
According to the National Westminster bank, United Kingdom companies spend twice as much on dividends as on research and development. By contrast, the top 200 international companies spend twice as much on research and development as on dividends. The business sector in Japan spends as much as a percentage of its gross domestic product on research and development as our entire business and Government expenditure put together.
We have demonstrated how the UK tax system encourages distribution rather than retention of profits. Financial institutions such as pension funds own nearly

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60 per cent. of the equity in UK manufacturing—a total of £350 billion. Of course, they receive large tax handouts to encourage them.
Mr. Jackson, the chairman of the Celltech group, told the Committee that the
"Government should consider with some urgency what steps can be taken to re-divert the savings stream so that more private individuals can contemplate investing in young companies a part of their savings".
He said that only a very small part is needed so that we can invest in the future and at the same time people can exercise
"their right to make their own wealth and provide for the future."
The Government need to consider ways in which that change can be brought about. They need to consider ways to encourage long-term investment in British industry and to ensure that small high-tech companies get the investment that they need.
As we heard, the Committee proposed that the Treasury should consider the possibility of providing fiscal incentives for increased expenditure in research and development. We quoted various new items of research which led us to believe that, over a five-year period, there will be more than sufficient payback to justify that expenditure. When we raised the matter with the former Chancellor of the Duchy, he said:
"We have had discussions with the Treasury about this."
It is clear from the Government's response that those discussions quickly terminated.
Although I welcome the initiative to consider the supply of finance and so forth, as explained in paragraph 18 of the response, how can we have an open look at the matter when the Government immediately rule out any possibility of even examining the case for tax incentives, without dealing with any of the arguments that the Committee put forward?
Last March, on the same day as the former Financial Secretary to the Treasury urged the CBI to enter into a dialogue with the Government over the problems of securing funding for British companies on terms comparable with those of our competitors, the Under-Secretary of State for Trade and Technology was answering questions in the House on interest rates for long-term loans. It is difficult to believe that they were speaking about the same issue.
The Under-Secretary of State told the House that British companies had no problems in securing long-term loans at favourable rates, whereas the Financial Secretary identified difficulties in raising capital for high-tech start-ups, problems with high dividend payouts and the short-term nature of many of the loans to small and medium-sized enterprises; many of the problems highlighted in the Committee report. As that Financial Secretary to the Treasury has moved on, it seems that the open mind which seemed to be signalled at that time has now been closed tight.
The Government make great play of their success in securing inward investment into this country. To some extent, that has been recognised by the Committee report, which states:
"We have been impressed by the potential in inward investment to boost the innovatory and technical capacity of UK industry. The influence of new manufacturers from Japan in raising standards throughout the supply chain has been considerable."
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That is true, but the figures show that—far from the boast of the Government that we have secured large amounts of inward investment—more money is going out of Britain and being invested abroad than is coming into the country.
The Government try to say that their policies of deregulation and low wages have led to their "success", as they call it. However, when Committee members were in Japan, it was made clear that low wages were not an issue at all for potential investors. They were concerned about the skills of the people and the infrastructure of the areas to which they were coming. Above all, our success in attracting overseas investment has been due to our one great advantage over other European countries—we speak the international language, English.
We have secured a considerable amount of inward investment, but we must address the lack of long-term investment in our own country and stop the haemorrhage of investment that goes from this country abroad. During the past five years for which figures are available, Department of Trade and Industry figures show that more than £8 billion more money has been invested overseas than has come into this country. I understand that the most recent figures are even worse, and show a deterioration. If we are to get the investment that Britain needs—yes, investment from abroad, but also the investment of our own country's wealth—and if we are to ensure that the investment that is available is invested for the future of our country, the Government should take more note of the recommendations in the Select Committee's report.
8.43 pm
Mr. Andrew Miller: In welcoming the Minister to his new post, I point out to him that if he cares to visit his boss's constituency in Wirral, West he has to trespass on my territory and pass through Ellesmere Port and Neston. There are other ways round, but that is the natural route in. In doing so, the Minister might care to note that he would have to pass four research centres—two in the private sector and two in the public sector.
The private sector organisations are involved in lubricants and electricity research and both are important centres of industrial research in our community. In the public sector are two parts of Liverpool university; the school of veterinary science and the botanical gardens at Ness, both of which are, in their own right, important centres of research.
The Minister should have a careful look at the work of some of the institutions which contribute greatly to British life, but he must also look at the needs of small and medium-sized companies which are emerging with fresh ideas, and he must look most carefully at how those businesses are supported. The hon. Member for Cheltenham (Mr. Jones) referred to Laboratory News, and quoted from the chairman of Save British Science. I hope that the Minister recognises that Save British Science has taken an objective view of the Government's action—or inaction—on the question of science. It has praised where praise is due and, on the issue of taxation, damned where damnation is due.
The Government take a two-edged position on the matter. When it is convenient, they pass the buck to the Treasury, and this is perhaps one of the examples where, in the interests of science, they should be leaning on the Treasury and persuading officials that this is the right way forward. I have just had an exchange of correspondence

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with a Minister from the Department of the Environment on the important issue of pollution caused by motor vehicle emissions, and the different fiscal policies that are applied to fuels used by motor cars. The response that I got was that it is a matter for the Treasury. It is extraordinary that matters which have a direct impact upon the environment are regarded by the Government as being simply matters for the Treasury. Surely Departments should be looking long and hard at why pressures are emerging for them to have a fresh look at their fiscal strategy.
I want to dwell on a comparison between some of the successful industries in our nation and the difficulties faced by small and emerging companies. I shall try to illustrate why I think that some of our smaller companies do not become big companies and either become victims of takeovers or disappear off the face of the earth. Companies involved in successful industries such as pharmaceuticals, aerospace and telecommunications would welcome any changes which the Government made. But historically, many of the successes in those areas—for example, the development of the System X switchgear, launch aid programmes in aerospace or developments inside the pharmaceuticals industry with a view to marketing through the national health service—have had a huge inbuilt advantage in that they knew exactly where the marketplace was.
It is interesting that, in telecommunications, much of the private sector work—with the exception of that which is done by Martlesham—has now disappeared out of this country. There is a risk that the successor to System X will be researched outside the UK. I hope that the Government will think carefully about the implications of that for jobs, both in research and development and in manufacturing.
In contrasting those three areas of success with some of the small companies, we must ask what those small companies need. They need ideas, education, training, financial backers, and infrastructure support such as my hon. Friend the Member for Kirkcaldy (Dr. Moonie) mentioned and which is available at institutes in other countries such as the Frauhofer, Max Planck and Steinbeis institutes, and others.
If we look, section by section, at the evidence received by the Committee, one must conclude that the Government are being extremely short-sighted in simply ignoring what was, as many hon. Members have already pointed out, a simple recommendation for a major re-examination of the case for fiscal incentives for research and development conducted by people and by companies. The Committee's recommendation also suggested:
"Such a review should be conducted openly, and its conclusions considered by experts outside the Treasury."
Perhaps the Government are a little uncomfortable with the final part of the sentence, which harks back to their Treasury-driven policy.
In their response, the Government simply said that there was no case for general tax incentives. I want to highlight the support that small and medium-sized companies need to enable the entrepreneurial spirit to flourish. Such support would encourage fresh scientific thinking in the smaller companies in the manufacturing industry and enable them to grow.
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On education, most members of the Committee shared my disappointment at the weakness of the evidence that we received from the Department for Education—I found it one of the most depressing sittings of our 18-month study. There was an acute lack of understanding as to what industry needs, for example, in terms of information technology. I find it quite extraordinary that existing benefits in our education system in relation to information technology, especially with the explosion in the use of the information super-highways and the Internet, are simply being played down by the Government.
In September, I read an article in a magazine which jokingly referred to the Government's contribution to the debate on the information super-highway in terms of the Department of Transport. It implied that the cones hotline is to be made available on E-mail. So we will be able to find out which roads might be dug up by various utilities and work out whether it would be wise to drive down them. I wrote to the magazine to point out that although it was a good idea in principle it presupposed that the utility company does not sever the telephone cable as well, as that would make communications rather difficult. Given the potential benefits within government for such information technology development, it is depressing that the Government have such a narrow view on the subject. I hope that they will have a fresh look at the evidence that some of their own Departments gave to our Committee.
The Committee also took evidence about various overseas institutes, particularly in Germany, which give infrastructure support to emergent companies. I was so fascinated by the role of one, the Institute for Micro Electronics at Stuttgart, that during the following summer, while on a holiday to Germany, I took a day out, much to the chagrin of my family, to revisit that institute. I was fascinated by the links that it has established between the major players in the Stuttgart area, such as Siemens, Mercedes Benz and Bosch, and small emerging companies. To see how the those large players give active support to the concept of potential future competition is an interesting challenge not just to British industry but to the British Government. Such institutes, which receive proper support from both the federal and state Governments, have an important role in the future.
As many hon. Members have already said, we need to look at the role of the financial institutions in supporting our science base. To use a well-worn phrase, short-termism seems to be the order of the day. There is no doubt that small and medium-sized companies are the biggest sufferers from that phenomenon. We cannot simply look at the role of the banks and other financial institutions in total isolation. We must consider it in the context of infrastructural support and education and training. One must ask why the banks are not prepared to adopt a positive role to science similar to that evident in other countries. One must conclude that the banks believe that, in comparison with investing in parallel companies in other countries, they would find themselves at a disadvantage if they invested in our science base. That belief is due to our failure to give such infrastructural support to those emergent companies that are full of fresh, good ideas.
That support, unfortunately, falls down in education, because of the lack of the kind of institutes that exist in other countries and because of our failure to give any assistance through our own fiscal policies. As the hon. Member for Pudsey (Sir G. Shaw), who chaired our

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Committee so admirably, outlined in his contribution, that complex relationship of support must be taken into account. I do not believe that it is adequate for the Government simply to say that they do not agree with the Committee. If the Minister is to be the Minister for science he must understand that science is based on careful study and analysis. The Government's response—a paragraph of a mere three and a half lines—represents neither careful study nor careful analysis. The Minister's conclusions are therefore faulty. I press the Minister to think again along the lines urged by hon. Members on both sides of the House tonight.
8.57 pm
Mrs. Anne Campbell: I join hon. Members on both sides of the House who welcomed the new Minister to his post this evening. He may not realise it yet, but he probably has one of the most interesting posts in government, and I hope that he will enjoy it as he should. It is important that he immerse himself in science. The previous Chancellor of the Duchy of Lancaster set a good example in doing so, and earned the respect of many scientists in the process.
This has been a high-quality debate, and I am pleased to be able to participate in it. I have enjoyed immensely all the contributions that have been made, and it is satisfying that so much thought and consideration has gone into the speeches this evening.
It is worth reflecting that it is 30 years since a Labour Prime Minister heralded the "white heat of the technological revolution". During the period since then, however, all political parties have come to realise the crucial importance of exploiting science and technology for industrial and commercial success. A recent White Paper on competitiveness underlined the importance of innovation and put in place a series of measures that will, I hope, encourage industry to make better use of the science and engineering base.
Universities are being encouraged to recognise the value of intellectual property rights and to protect their activities appropriately. I should like to say more about that, because how intellectual property rights are treated by universities and exploited by industry is crucial to the whole process of innovation. I am concerned about whether the line which the Government are taking on intellectual property rights will necessarily lead to the industrial success which they are promoting.
When Professor Sir David Williams, vice-chancellor of Cambridge university, gave evidence to the Science and Technology Select Committee's inquiry, he said:
"It is the policy of this University not to take title itself in the intellectual property rights of its employees nor to apply for any patent in the name of the University itself."
He went on to say that the "Cambridge phenomenon" has been attributed to the university's policy on intellectual property rights.
That appears to be unusual, if not unique, among universities in the UK. Indeed, most of the institutions that gave evidence to the Science and Technology Select Committee said that they made every effort to exploit their intellectual property rights, and several universities, such as Edinburgh, quoted the fact that they were making some £3.5 million a year through contract research and the royalties from their intellectual property rights.
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The great incentive for universities, which have been starved of funds over the past few years, is for them to follow the Government's advice. Universities have done everything possible to raise income from a variety of sources, one of which must be income from industrial research, whether funded directly by outside firms or by royalties, as I have just described. The reality, however, is that, despite some excellent endeavours by industrial liaison officers and highly professional organisations such as the British Technology Group, universities earn only a tiny fraction from their intellectual property rights of the public funding that they receive in grants. One commentator put that amount at about 1 per cent., which is extremely small.
Chris Elliott, director of Smith Systems Engineering, said:
"Contract research should be a low priority but has been increasingly popular with Universities because it earns money. It is dangerous because it can distort the priorities and lead to a risk of Universities changing from being centres of academic excellence to centres of industrial mediocrity."
He went on:
"The real value of research lies in the understanding that it generates, not the knowledge—and understanding is not something that can be packaged and sold under licence."
When the Science and Technology Select Committee reported on that matter, we said that it was important to take a flexible approach to intellectual property rights. Although in some areas there may be little packets of knowledge that can be sold on to industry for exploitation, the problem is that, when universities are encouraged to exploit all their IPR in that way, the understanding is contained rather than disseminated. We have industrial liaison officers who start behaving like police officers and raising barriers, rather than playing what is perhaps their proper role as salespeople and advertising executives.
Industrial liaison units in universities have problems. Many are understaffed and under-resourced. Industrial liaison officers are often undertrained and do not appreciate the nature of the commodity that they seek to exploit. Several firms have complained that universities demand too high a price for the knowledge and understanding that they have to sell.
I believe that that shows a misunderstanding of the way in which technology transfer is effected. If industry is to benefit from the understanding that is generated by university research, industry must participate throughout the process, and gain a thorough comprehension of the ideas.
One of the ways that the research councils have been trying to promote such comprehension is by means of firms adopting what they call the "heavy uncle model"—that is, providing expertise, guidance and some funding, as well as access to special facilities, if needed. I am pleased to say that I know of an excellent example in my constituency, in the form of the Rolls-Royce university technology centre, which is about to be opened in the department of material science at the university of Cambridge. That is a major collaboration; more than £1 million of funding will be provided by Rolls-Royce.
That type of input from British firms is all too rare: in the past it has been provided by Hitachi and Sony and many Japanese firms and firms from the rest of Europe and from the United States, but infrequently by British

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firms. Therefore, I very much hope that the Rolls-Royce lead will be followed by other major industrial players in the UK.
The policy of the university of Cambridge, of assigning intellectual property rights to the inventor, has had many other desirable effects. As Sir David Williams has said, it is one of the factors that has led to what is commonly known as the "Cambridge phenomenon"—the growth of many high-tech firms in and around Cambridge. It has encouraged many scientists to become entrepreneurs, and to set up their own high-tech firms and consultancies.
The success of industrial collaboration and the local high-tech economy in Cambridge is a shining example to the rest of the United Kingdom. Cambridgeshire now has 27,000 high-tech jobs, and it is a rapidly expanding sector. The Government should take time to think about that, and to consider what they can learn from that experience. There are some special factors in Cambridge; we should think about whether those can be replicated in other parts of the UK. The approach to intellectual property rights that has been taken in Cambridge is an important factor, which should continue.
Unfortunately, the university of Cambridge is becoming increasingly hampered by the research councils' insistence that intellectual property rights be exploited. Departments with projects that rely on research council funds are being told that they should not collaborate freely with industry without demanding a commission for their time and understanding.
The Select Committee on Science and Technology recommended that there should be a diversity of arrangements for exploitation. That means that universities should be free to build links and co-operate with industry in whatever way is beneficial for that collaboration to succeed. They should not be under pressure from the research councils, or anyone else, to sell every bit of knowledge and understanding. That would be highly counter-productive.
I associate myself with the remarks of the hon. Member for Wantage (Mr. Jackson) about the importance of basic research. That subject is not discussed in the report, because we were speaking about the rather applied and market-oriented research that universities and industry do when they work together. However, basic research is fundamental, and it is crucial that it is not geared into applied areas and mission-oriented sectors that have a practical and applied basis, because there are some excellent centres of basic research in this country.
It is important that those continue, because they are providing the foundation and basis for industries 20 or 30 years' hence, instead of today's industries. I know that there is much concern in my constituency about the way in which the Government now talk about mission-oriented research. There is much alarm that some of the basic research may not continue to be funded.
We said a great deal in the report about the significance of funding. I am anxious about the funding for small technology-based businesses. Many small firms complain about the lack of availability of finance, especially for development.
A survey of such firms in the Cambridge area is quoted in the report; it reveals that only one third of the firms had outstanding bank loans, just two had used the small firms loan guarantee scheme, and venture capital was regarded as far too expensive to be a viable option. Most
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entrepreneurs had to rely on families and friends—which one firm called the black economy—to start or develop their businesses.
Many Cambridge entrepreneurs attribute the successful start of their firms to an innovative manager at Barclays bank in the early 1980s called Matthew Bullock. It is worth mentioning his name, as it comes to many people's lips when they describe how their own firms were started at that time.
Unlike modern bank managers, Matthew Bullock appeared to have a delegated responsibility for deciding which ideas were worth funding, and he was prepared to take the sort of risks from which banks in the 1990s shy away. If it is impossible for banks to emulate Bullock's success in post-recession Britain, we need to evolve much better systems for financing people who have ideas that they wish to exploit.
Many of our more successful competitors have different arrangements to ensure longer-term financial support is more readily available. We need to shift towards a more co-operative relationship so that banks can offer more advice, and give both technological and business support. Small businesses need access to funds that are both competitive and secure.
Yesterday's edition of The Observer contained an excellent article by William Keegan, in which he discussed a book by David Storey of the university of Warwick, "Understanding the Small Business Sector". He said that 40 per cent. of small businesses starting today do not survive for more than three years. But if firms are technology-based, they are more likely to offer high growth rates, more jobs—and many more interesting jobs—and less risk of failure.
The trouble is that banks and venture capitalists are wary of high tech. During our inquiry, we found that often there was no one in a position of responsibility able to take the relevant decisions, with the depth of knowledge and understanding of high-tech business necessary to take decisions about funding.
That is in contrast to the United States, where 80 per cent. of venture capital portfolios involve technology-based business compared with only 20 per cent. here. But in my constituency in Cambridge, the St John's innovation centre has had an extraordinarily low failure rate among high-tech firms—only 4 per cent. per annum in the past five years, which must have been among the worst years for most small businesses.
Throughout a very damaging recession, we have had a failure rate among high-tech firms of only 4 per cent. That is something of which banks, venture capitalists and everyone else involved in the funding of business need to take note because it is not generally recognised. There is a myth that high-tech firms are high-risk, which is simply not true when one considers the facts. Mr. Storey is quoted as saying:
"We need a huge cultural change to encourage and promote the development of science-based businesses."
I could not agree more.
I welcome the fact that the Labour party is discussing the idea of helping to establish a private sector-managed investment fund whose assets would be available to small businesses. We are considering ways of using the tax system to support that scheme. A fund would be managed

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regionally and would act as an intermediary between the investor and the small business. Such an arrangement is long overdue.
Very few hon. Members tonight have mentioned the importance of skills and training. I do not intend to dwell very long on that matter, but I want to draw attention to the letter that has been sent, I think, to most hon. Members today by the Institution of Electrical Engineers. It draws attention to the need for professional engineers constantly to update their skills.
The institution today announced an ambitious plan to establish up to eight engineering centres by the end of the century. They will be strategically placed around the country; the first will be located in Birmingham, I believe. The centres will provide easy local access to training courses, lectures and similar activities. They will be available not only to members of the institution but to all similar institutions and private organisations. They will combine modern lecture theatres with meeting rooms and offices. They will become one-stop shops for the professional engineer to gain access to up-to-date technical information and skills training.
That is a welcome recognition of the importance of engineering training and of the continued need to keep skills up to date, particularly in the engineering sector. I hope that other professional organisations will follow suit and try to do the same for their people working in British industry.
One of the Select Committee report's most important recommendations has been mentioned by almost every hon. Member—the major re-examination of fiscal incentives for investment in research and development, both at the personal and at company level. Having carefully considered evidence on the matter, Committee members felt sufficiently strongly to write to the Chancellor of the Exchequer. The reply did not instil confidence. It said:
"As you will know, the Government's general view is that we see no need for any further change in the already generous arrangements for research and development".
The reply to the Select Committee report was even more depressing. It said:
"The Government does not, however, agree with the Committee that there is a case for general tax incentives for spending on research and development."
I started to think about why the Government are saying those things. Is it because they are convinced that the evidence is not worth considering? Have they rejected it in advance? That is one possible explanation. Or are they worried that, if considered properly, the evidence would show overwhelmingly good reasons for spending more money?
I cannot decide which reasons the Minister could possibly have for rejecting an eminently sensible idea. I therefore hope that he will tell us tonight whether I am correct in my assumptions, or whether there is a different reason why the Government do not even want to examine the compelling evidence, which convinced Committee
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members that the proposal was worth considering and which would convince him if he were seriously to pay attention to it.
Dr. Bray: Is not one of the most worrying aspects of the Chancellor's letter that he says that he is generous? Is the Chancellor in a position to be generous to anyone?
Mrs. Campbell: I was amused and entertained by my hon. Friend when he spoke about true tax incentives, and when he compared the United Kingdom with other countries. It is clear from what he said that the UK is not generous in its tax incentives for R and D. Perhaps that explains why business expenditure on R and D is so low in this country compared with our international competitors.
Sir Giles Shaw: I do not wish to enter into a debate about the generosity of the Chancellor—that is probably a contradiction in terms—but I suggest that the generosity lay in the fact that the experiment on the American basis suggested a percentage of economic growth which more than compensated for the actuality of the fiscal incentive. The generosity had been demonstrated in the experiment.
Mrs. Campbell: I am grateful for that intervention. Our investigations revealed that, if the level of business expenditure in the United Kingdom was increased over five years from 1.36 per cent. to 1.8 per cent. of GDP, it would increase the rate of growth by 0.8 per cent., or £5 billion a year.
That is an enormous sum of money, which no Government could afford to ignore or say is not worth considering. I am sure that the Minister has got the message that we want him to take this point seriously. It is true that the tax yield from the increased incomes would quickly exceed the tax loss from the tax credit. I regret that the Treasury seems unable to take that point on board.
We are trying to encourage our industrial firms to invest in R and D, new equipment and training, but we are not prepared to do so ourselves. Perhaps the Government could ignore Treasury advice for once and set a good example in this instance.
It is essential that the Government do everything possible to expand the R and D they carry out, and that carried out by business. The President of the United States has just announced that he intends to increase the total amount spent on R and D by Government and business from 2.6 per cent. to 3 per cent. of GDP. At the same time, there will be a massive switch from defence R and D to civil R and D. The United States Government call that the transition from a vigilant society to a humane society. They are powerful words, which we too need to note.
Although the Government are intent on cutting defence spending, there is no plan for that money to be switched into civil research in which we clearly need to invest. There is a very sharp contrast between our plans and those of the United States. In this country, R and D has already slipped to 2.1 per cent. of GDP, and the Government appear to be proposing that it should fall even further—there are sharp cuts in the pipeline over the next two years.
Many scientists are alarmed by Sir Peter Levene's inquiry into, or efficiency scrutiny of, Government research establishments. Scientists are worried, but not because they do not welcome change—I think that many

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feel that the time is right to re-examine Government research establishments and ascertain what ate their objectives and whether they are still being met. What is demoralising and dispiriting most of the people who work in those establishments is the fact that the exercise is Treasury-led. At the end of the day, the Government are hoping to achieve the reduction in R and D spending outlined in their "Forward Look" plans.
There has been a dramatic decrease in Government spend—around 35 per cent. between 1986 and the projected spend for 1996. Some of that reduction in spend still has to be achieved and, as I have said, the great worry is that Sir Peter Levene's inquiry into Government research establishments will find the means of effecting that decrease in Government spend.
I do not know whether the Government hope that private business will make up for the reduction in Government research and development. I am afraid that there is little hope that that will happen. I believe that we are seeing the country spiralling down because essential investment is missing. What worries me is that, in the next century, Britain will become one of the technologically illiterate countries that will make up the new third world.
9.24 pm
The Parliamentary Secretary, Office of Public Service and Science (Mr. Robert G. Hughes): I thank hon. Members who have made some kind remarks about me and about my right hon. Friend the Chancellor of the Duchy of Lancaster. It is, indeed, a great pleasure and change for me to address the House. As I took a vow of silence in the Whips' Office, it has been two years since I addressed the House. I hope that, after hearing my first address, my constituents will think, "I wonder why he did not speak before," rather than wondering why I spoke at all.
The hon. Member for Kirkcaldy (Dr. Moonie)—I am part Scots and my grandmother, if she were still alive, would kill me for my dreadful pronunciation—mentioned the Higgs boson. After two years in which I sometimes wondered whether there was a majority for the Government in the House, it is an interesting change to wonder whether the top quark exists or not. That is quite a difference.
I welcome, as the Government have, the report from the Select Committee on Science and Technology and I commend it for its work. In particular, I commend my hon. Friend the Member for Pudsey (Sir G. Shaw), not only for his work over such a long period on putting the report together, but for the statesmanlike way in which he put his case tonight. It is fair to say that there is a great deal of agreement between the Government and the Committee, although one would not necessarily have thought so from listening to the debate tonight.
Nevertheless, the debate showed that there is a great deal of expertise and a great deal of knowledgeable concern about these important issues in the House. Some think that it is fashionable to write in the press that if one wants expertise and knowledgeable concern, one has to go to another place. I have never thought that to be true. Tonight's debate has shown that. There is no doubt that the Government are committed to promoting science, engineering and technology. That commitment is shown, although we can bandy statistics—there have been a lot
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of statistics in the debate—by the fact that the science budget has increased by 30 per cent. in real terms since 1979–80.
Science and technology touch every aspect of our daily lives. Our future prosperity and quality of life depend on them, as has been pointed out by many speakers in the debate. The Prime Minister, of course, is determined that science should play a part in the centre of our lives, at the heart of Government. That is why, as most hon. Members have said, he appointed the first Cabinet Minister with responsibility for science and technology for 30 years. That has been referred to by my hon. Friend the Member for Pudsey and by many other speakers. They have referred to the proud record of my right hon. Friend the Member for Bristol, West (Mr. Waldegrave) in terms of his work and in terms of the trust that built up in the scientific, engineering and technology communities in him as the first Cabinet Minister with responsibility for science, aided as he was first by my hon. Friend the Member for Wantage (Mr. Jackson) and then by my hon. Friend the Member for Boothferry (Mr. Davis).
My right hon. Friend the Chancellor of the Duchy of Lancaster and I will seek to follow very much in the mould of our predecessors. We shall seek to be a friend to the science community, to be a voice at the heart of Government and to ensure that the arguments, some of which have been reflected tonight, are made right at the heart of Government.
One of the points raised by my hon. Friend the Member for Pudsey, the Chairman of the Select Committee, was whether the Office of Science and Technology is here to stay. I can assure the House that it is. It is a voice that must be heard, not just at the heart of Government but across the European Union and throughout the world. I shall refer more to that in a minute, because science is an international endeavour in which we believe Britain must play its full part.
The Government set out their policy for science, engineering and technology in last year's White Paper, "Realising our Potential". At the heart of our policies is a conviction that we need a closer partnership between industry, academia and Government. The report of the Select Committee, on which the debate is rightly focused, showed that, in general, members of the Committee share our view. We welcomed the Select Committee's inquiry and were pleased that the Committee was looking at an area of such central importance.
The Committee's conclusions, in my view—it is perhaps why our response was rather shorter than the report itself—were broadly supportive of what the Government are doing and, of course, we are now seeing the first results of the policies that we set out in "Realising our Potential".
Let me deal now with some of the specific points that were made by right hon. and hon. Members. Several hon. Members, including my hon. Friend the Member for Pudsey and the hon. Members for Kirkcaldy and for Cambridge (Mrs. Campbell), referred to the efficiency unit's scrutiny of public sector research establishments. The report, which was published in July, raises important issues about the future of scientific establishments in the UK. It is important that we get the arrangements right, which is why we are having a period of public consultation. My right hon. Friend the Chancellor of the Duchy of Lancaster will meet the Science and Technology

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Select Committee on Wednesday and we are very much looking forward to hearing what it and the Committee in another place has to say about it.
Obviously, because we are towards the end of a consultation period, I should like to reassure the House that decisions have not been taken on the recommendations in the report. I am sure that hon. Members would not want me to pre-empt the decisions while we are still listening to those with an interest in what the Committee has to say, but it is important, as we pointed out in the science, engineering and technology White Paper, that the ownership and financing of the public sector research establishments is examined to ensure that the resources that the Government provide are spent as effectively as possible. I do not think that any hon. Member would seriously argue with that. It is an efficiency scrutiny, and we are seeking to spend the money in the best way possible.
I now deal with a matter that every hon. Member speaking in the debate has raised—tax incentives for research and development. There was, as hon. Members pointed out, only a three-and-a-half line reply in the Government's response to that matter. It is simply that we do not consider that there is a case for general tax incentives for spending on research and development. We believe that the current system of relief for R and D is comprehensive and substantial, and almost all expenditure is written off when it occurs, or very shortly thereafter.
A number of foreign comparisons were made, but foreign tax comparisons are notoriously difficult to make, as the complete fiscal picture must be considered. UK corporation tax rates, for instance, are among the lowest in the Organisation for Economic Co-operation and Development and the Government believe that low tax rates, a broad tax base and few special allowances are the best way to promote investment and stimulate industry.
I would add just two points to that. Of course, some of the companies quoted in the debate tonight would prefer tax credits to grants. I understand that. They are bound to say that, because tax credits remove some of the strings that are attached when a grant is paid. It is understandable that they would take that view, but nevertheless, that is not a good reason for changing.
Sir Giles Shaw: I apologis for interrupting my hon. Friend so early in his speech.
I fully understand the reasons why, for example, it is considered that there are other ways of dealing with the matter than tax credits or grants—for example, through taxation, economic management and so on. The crucial point, which my hon. Friend might care to address—probably not tonight, but subsequently—is that the condition in which we find ourselves requires a significant lift in the commitment to innovation and investment technology by industry. It is that aspect of it that makes other systems of releasing new energy in that sector worth re-examination.
Mr. Hughes: My hon. Friend has made an extremely important point. No one would disagree about the importance of lifting the amount of investment in that area. As the point has been made strongly in the debate by every speaker, I will ask the officials in the OST to consider the matter again in terms of the case that has been made.
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I listened carefully to the arguments. Of course the argument can be made in terms of what we want to happen. However, the question is whether what we want to happen will be realised by the use of tax credits. I heard no substantial arguments to convince me that the advice that I have been given is wrong, but that does not mean that such advice does not exist. As I have said, I will ask my officials to look at the matter once more.
Dr. Bray: I understand what the Minister is saying and he is right to say that the subject is complex. That is why we asked that it should be thoroughly examined. Has the Minister seen the Inland Revenue evaluation of Bronwyn Hall's paper? If not, will he read it and lay it before the House?
Mr. Hughes: While I have not seen that paper, it is something that only my right hon. and learned Friend the Chancellor of the Exchequer would bring before the House. Funnily enough, that has always been the case with Governments in the past and it will be the case in future.
Mr. Miller: There is a key document which is crucial to the analysis of the problem that we are facing, a problem that has been identified by hon. Members on both sides of the House, but the Government are saying that some of that evidence will not come out for public consumption. I thought that the Minister's Department was responsible for open government.
Mr. Hughes: No Government have published more information about the workings of government than this Government. However, that point is rather removed from the debate.
If people recommend a change as substantial as the proposal, they must produce harder and more concrete arguments than they have produced today. Several hon. Members prayed in aid small companies when they advanced their argument tonight. Many small and perhaps struggling companies would be tax-exhausted and would not pay tax. How can we believe that tax credits would help them better than grants? The argument does not stand up in that sense.
Dr. Bray: Tax credits, as income tax allowances, would help small companies as they would give them credit against future tax liability. The Inland Revenue published an evaluation eight years ago. The Minister was quite right to say that it would be for the Chancellor of the Exchequer to publish it, but surely he could give an undertaking to make representations to the Chancellor to the effect that he should update that study.
Mr. Hughes: If a company is not paying tax and does not believe that it is going to pay tax, it may not be impressed by the idea of receiving a tax credit. I have already given an undertaking to the House that I will ask my officials to consider the matter in the light of the comments that have been made today.
I want now to consider the apparent conflict between paragraphs 12 and 25 in the Government's response. We believe that our approach to innovation in industry is increasingly directed to small and medium-sized companies by improving the climate for innovation, helping to identify and disseminate best practice, helping firms to get the services and support that they need and that industrial research and technology organisations can

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supply and by helping firms have access to, and use effectively, technology from home and abroad. I do not believe that there is a difference between those two paragraphs.
I want now to refer to the points raised by the hon. Member for Ellesmere Port and Neston (Mr. Miller) about the information super-highway and the Internet. A recent report for the Government by PA Consulting in February 1974—[Interruption.] I beg hon. Members' pardon; we are ahead of our time, but not that far ahead. A report for the Government in February 1994 found that the United Kingdom had a more developed fibre network than the United States or Japan, largely thanks to the investment of billions of pounds by cable companies. Whereas the Americans started by choosing to pay for the installation of the network to lead to the information super-highway, they are now moving toward our approach. It is not wise for us to adopt their approach.
The Government, through the Office of Public Service and Science, are giving a lead by consulting on public service applications of information super-highways. We are proposing to make public service information available as a first step on the Internet, called "open gov".
Mrs. Anne Campbell: I am sure that the House is pleased to hear that. Is it desirable that we have in the United Kingdom several small companies which are financed mainly from across the water in the United States and which are installing a variety of systems, not all optical fibre, with their own standards and regulations? That will make it difficult for us to have a national network that is worthy of the name.
Mr. Hughes: Of course there are some concerns about that matter. Even with the problems that exist and, frankly, even if the money is inward investment from the United States, Canada or anywhere else, that matter does not concern me at all because we have the benefit of that investment. Not all investment is exactly what we would want, but if we state-directed it and told companies precisely what they could and could not do, we would not receive that investment at all. Therefore, I would be loth to go down that road.
My hon. Friend the Member for Wantage rightly spoke about AEA Technology and the importance of ensuring that it is not fragmented on privatisation. We shall do our best to ensure that it is not, for the reasons that my hon. Friend gave, but, if he considers that points are being missed he will be very forthright in telling us what we should do on behalf of his constituents. We would welcome his input.
I have referred to a new partnership. That brings me to the launch of the technology foresight programme, which was one of the most important steps in building the partnership. An enormous number of science-driven opportunities lie before us. Indeed, the hon. Member for Motherwell, South (Dr. Bray) referred to some of them. If we take advantage of them we shall reap large rewards. For instance, victims of heart disease may benefit from the use of miniature robots
which can work inside the body to unclog arteries. International business and tourism may benefit from systems that provide real-time translation of telephone conversations into various languages.
Much of the tedium of business travel might be replaced by "virtual meetings" which bring participants from many locations into contact through multi-media
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communications. When that was mentioned in a debate on the travelling of Select Committees, it did not enjoy a very good reception, and I am not sure whether it would do so more widely. The environment might be cared for with the help of custom-designed organisms which clean up pollutants.
Many of those advances are just around the corner, as hon. Members have said. We must face up to the stark reality, but not all hon. Members did. The United Kingdom cannot afford to do all the necessary science and technology to realise such advances—indeed, no one country can. Technology foresight is important to enable us to identify future market opportunities and emerging technologies to allow United Kingdom companies to exploit them.
My hon. Friend the Member for Wantage referred to the risks to the science base of our moving money from basic science. We recognise that risk as well, and it is our intention to ensure that that does not happen.
The technology foresight programme has built new networks between industry, academics and Government, and the process itself, as I saw at the technology foresight forum, is of great value and importance. We have established 15 panels to conduct foresight in specific areas, and those produced preliminary views during the spring and summer. The programme covers the sectors that one would expect, such as information technology, manufacturing and pharmaceuticals, but it is also breaking new ground by covering financial services, retailing and leisure.
In a most thoughtful speech, the hon. Member for Motherwell, South spoke about smart cards, the effect of new technology on banking and the effect that that could have on jobs, on the way that people use banking and on the way that people shop. All of those things are important. That is part of the work that the financial services panel is undertaking. As the City of London is the centre of financial transactions not only in Europe but in the world, it regards the programme as an opportunity to expand its business. We must never forget that what may be a problem can be an opportunity as well.
The panels are holding 60 regional workshops to consult on the key issues arising out of their initial analysis. To reach the parts that would not be reached otherwise, a postal questionnaire was sent to 8,000 people. It has already elicited more responses than equivalent exercises in Germany and Japan, and the responses are still coming in thick and fast.
The technology foresight programme has attracted enthusiasm and commitment from a wide range of firms, research and technology organisations, academics, professional institutions and learned societies. Looking at the amount of work that is put into the technology foresight programme by important people from all those organisations, I wonder how some of them find time for their day jobs. I simply take this opportunity to thank the companies and institutions that have been so generous in allowing their senior employees to spend so much time on the technology foresight programme.
The programme is on track to produce its first results next spring. They will inform our thinking about science, engineering and technology, and will provide useful guidance for private sector investment. We have already announced our intention to undertake another foresight exercise in a few years' time. We want to learn from our

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experiences of this programme in devising the next one, and will welcome the views of the Select Committee and other hon. Members in due course on what they have learnt from the technology foresight programme and what they would expect from the next one.
Several hon. Members spoke about education and training. For me, that comes within the important topic that was launched by the White Paper, public understanding of science. As hon. Members, in particular the hon. Members for Ellesmere Port and Neston and for Cambridge, pointed out, it is crucial to cultivate tomorrow's scientists now and to encourage the contributions that they can make to wealth creation and our quality of life.
In January, we launched a campaign to enhance public understanding of science, engineering and technology. The first event in the campaign was the national science week which was organised by the British Association for the Advancement of Science with funding from the Office of Science and Technology. New scientists described the week as a staggering success—and,
indeed, it was. We believe that about 1 million people attended some 1,200 events in 230 towns and cities throughout the United Kingdom. I am able to tell the House that in our preliminary examination of national science week for next year, there have already been expressions of interest which substantially outweigh the amount of work done last year.
I put a lot of store by the national week of science, engineering and technology, and my right hon. and hon. Friends and I and, I hope, hon. Members from both sides of the House, will play our part in ensuring that the large number of events that will be run are a success, and that young people will learn more about the importance of science, engineering and technology. SET95, as it will be called, can be a staggering success again and can produce a great deal of important work to increase public understanding.
The Office of Science and Technology will spend £1 million on the overall campaign in this financial year. That includes £270,000 to the British Association and the Gatsby Foundation, to promote and publicise substantial existing activity; £150,000 to the Committee for the Public Understanding of Science in support of two grants schemes; and £120,000 for work in schools, including the highly successful creativity in science and technology awards scheme—CREST—which I had the pleasure of attending a few weeks ago. The awards are for important and interesting schemes and experiments put together mainly by fifth and sixth-formers.
One of our main targets for next year is to encourage greater industrial participation in science week. My right hon. Friend the Chancellor of the Duchy of Lancaster has invited the top 200 companies by R and D spend to consider how they might be involved. We are also keen to encourage more women to participate in science, engineering and technology. The White Paper recognised that in Britain we underuse the talents of women in those sectors, and that that, indeed, was to our cost and to the country's cost. In response, we have established a development unit within the Office of Science and Technology to tackle the issue. I am pleased to tell the House that the head of the unit has just been appointed. Linda Sharp is a civil servant mathematician currently
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working at the Ministry of Defence. She will take up her duties in a few weeks and will spearhead this important work.
Let me say a few words about the priorities for future action. The Government are continuing to develop their policies for science, engineering and technology. Our priorities for action include, first, taking forward the technology foresight programme. We will have the first overall conclusions next spring, but that is only the start. We must make sure that the results are widely disseminated, so that everyone with an interest—in industry, Government and academia—can take them on board. We shall help to sustain the networks that have been developed, which are so crucial to the new partnerships mentioned in last year's White Paper.
We shall develop the "Forward Look". My hon. Friend the Member for Wantage was worried about what would happen to the "Forward Look". It is safe in the hands of the Government. Government-funded science, engineering and technology is important. Our aim is to produce a more far-sighted approach to science and technology policy and to provide fuller and better information on the Government's investment. Next year's "Forward Look" will reflect the first results of the technology foresight programme.
We shall continue to promote the public understanding of science, engineering and technology. My right hon. Friend the Chancellor of the Duchy of Lancaster and I are concerned that science should be in the mainstream of public debate. Our public understanding campaign will include what we hope will be an even bigger and better science week, as I mentioned earlier.
We shall continue our quest for maximum effort in the administration of the research councils. We want to direct as high a proportion as possible of the science budget into supporting top-quality science and engineering. The director general of the research councils is working with the councils to ensure that this happens.
We must preserve the high quality of basic research, which has been mentioned in the debate, particularly by my hon. Friend the Member for Wantage, but in a framework informed by technology foresight and benefiting from closer partnership between those in industry, in Government and in academia.
The international aspects of the matter have been mentioned in the debate, particularly by the hon. Member for Kirkcaldy. We are developing the specific programmes under the fourth EC framework programme and we look forward to finding a satisfactory basis with our international partners for formal approval of the large hadron collider.
Our guiding principle in each case will be to secure settlements which are good for Britain and good for science. Certainly my experience at the last European Research Council meeting, which agreed 10 research programmes under the fourth framework, is that we are far from being alone in the European Union in putting national interest high on the agenda. Of course, this is an international matter and we want to collaborate. We want to co-operate with our partners in the European Union and beyond and my right hon. Friend and I are doing so. To suggest, however, that we should not put British interests high on our agenda is something with which I would not agree.

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Shortly, we shall establish the OST development unit to promote greater participation by women, as I mentioned. We are reviewing the LINK programme, with the objective of broadening it to deliver high-quality collaborative research with minimum bureaucracy.
We shall develop an action plan based on the efficiency unit's scrutiny of public sector research establishments. Again, I assure the House that the priority will be to ensure that resources are devoted to science, with the minimum of overheads.
In Britain, we have always supported and carried out good science. It is not just me saying that—we have supported and carried out good science that is internationally recognised as being the most exciting and innovative in the world and the Government are determined to maintain the tradition of excellence.
When he opened the debate, my hon. Friend the Member for Pudsey said that we must see to it that the initiatives that we have set in train lead to an increase in activity. That one phrase could be our watchword—increase in activity and increase in success for Britain.
The Government's policies will ensure that we boost our economy and enhance our quality of life. That is our concern and it has been the concern of those hon. Members who contributed to the debate. It will continue to be our joint concern as we go forward in the important matters that we have debated tonight.
Mr. Michael Bates: I beg to ask leave to withdraw the motion.
Motion, by leave, withdrawn.

Standard Spending Assessments, Isle of Wight
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]
9.57 pm
Mr. Barry Field: Thank you for granting me this debate, Madam Speaker. Having heard the technology debate, when we looked forward, perhaps I can delve into the past. Before I do so, I welcome my hon. Friend the Under-Secretary of State to his first Adjournment debate on the funding of services on the Isle of Wight and I also welcome the fact that there are two Whips on the Front Bench, both of whom were my favourite candidates for promotion—especially since they became Whips.
If my record is anything to go by, my hon. Friend will be answering many more of these debates. Since my arrival in the House in 1987, I have had or participated in 11 debates. on the subject, which is an average of 1.5 per annum.
Tonight, I intend to try to turn the tables on the media by being the first Member of Parliament to offer a bribe to the public. I am offering a free holiday for one week on the Isle of Wight, which far exceeds the offerings of a fat Egyptian in some run-down and shabby establishment on the far side of the channel. That parliamentary prize is available to anyone who can name me one constituency that has campaigned for longer than the Isle of Wight on any issue that he or she likes to name.
Our campaign began in 1960, when my predecessor but one, the late Mark Woodnutt, said in the debate on the Local Government General Grant Order:
"I wish merely to protest against the adverse effect it has on some authorities, including my own county of the Isle of Wight. I realise that the Isle of Wight is one of a small minority affected in this way, but for that very reason I feel that something should have been done to give relief."—[Official Report, 8 December 1960; Vol. 631, c. 1488.]
As a result of Mark Woodnutt's relentless campaign, in 1962 the Edwards committee reported to the House on the workings of the rate deficiency grants in England and Wales. The chairman, Mr. F. L. Edwards, was Under-Secretary for Finance and Accountant-General at the Ministry of Housing and Local Government. I am delighted to see that a distant relative of my hon. Friend the Minister—Mr. J. A. Jones, clerk of Knighton rural district council—was also a member of the working party.
Chapter 4 of the report is headed "The Special Position of the Isle of Wight". Paragraph 30 of that chapter states:
"Prima Facie there is a case here for some weighting to take account of the inevitably higher costs caused by severance by sea (as is provided for the Isle of Scilly.)"
So there we have it. A firm and unequivocal recommendation from the Department of the Environment's predecessor, and 32 years later the Isle of Wight is still waiting. If anyone can beat that unenviable record, a free holiday on the Isle of Wight is his. The only rule in the competition is that only those who hold British citizenship may take part.
Next year, the island will have the first unitary authority in the country and that provides us with a unique opportunity. I believe that we have already achieved victory on our standard spending assessments, as the very fact that the Department's officials are considering our case together with the Association of County Councils—
It being Ten o'clock, the motion for the Adjournment lapsed, without Question put.
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]
Mr. Field: The fact that the Department's officials are considering our case together with the Association of County Councils is, I believe, official recognition of our long-standing problem.
Tomorrow, as my hon. Friend knows, I shall be leading a deputation to see the local government Minister. I hope that this debate, and my hon. Friend's knowledge of local government and of the Isle of Wight's problems from his time on the Environment Select Committee, will tip the scales in our favour.
Before I deal with the fire standard spending assessment, I shall mention the situation over the community care special transitional grant for 1995–96. The island has consistently argued that the violent swing in using the SSA formulae for 1994–95 should have been damped by applying a floor and ceilings approach. Such an approach is a quite usual arrangement in the Department of Health and, given that no changes can now be made to the 1994–95 distribution, a mechanism should be found to redistribute the unused grants of local authorities for 1993–94.
Ministers at the Department of Health have said recently that that has been ruled to be illegal, but something is clearly wrong when some authorities that are unable to spend all their grant publicly announce their embarrassment at receiving too much money and at their inability to spend it. The Isle of Wight feels that it should have had a smoother transition from STG to SSA for community care.
Having been in Parliament for more than seven years, I know that all things are possible if the good will of officials exists and if Ministers give the nod. I hope that my hon. Friend's Department will explore this point again for us. In view of the council's request to see the Prime Minister on this issue, my hon. Friend might give me an undertaking to come back to me on the matter when his officials have looked at it again. I can then tell Downing street that we have explored every possibility before troubling the Prime Minister.
It is, however, on the fire SSA that I wish to concentrate tonight. Several delegations have seen Home Office Ministers about this problem, the first of which was in 1988 soon after my election. My noble Friend Lord Ferrers—then the Minister responsible for the fire service—has been a consistent supporter of the island's case and expressed himself to be very surprised at the small amount of money, which was causing such problems for the island. His exact words were, as I recall, "Amazing! You couldn't buy a cup of tea and a wad for that!"
Lord Ferrers and Nick Roberts, his assistant private secretary, confirmed to me, to the Isle of Wight county council and to His Excellency the Governor of the Isle of Wight that he had written and spoken to the Minister for Local Government following our subsequent meetings. I have passed copies of our correspondence to my hon. Friend and I am sure that he will see that the tenor of the papers is that the Home Office has always supported our case. Under the Fire Services Act 1947, the fire authority has a statutory duty to provide an adequate fire service. Successive inspections by Her Majesty's inspectorate of
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fire services have agreed that the current levels are the very minimum required, yet this service costs 50 per cent. more than the SSA formula provides.
The ferry crossing for a fire vehicle takes on average 50 minutes and for a large part of the night there is no scheduled crossing. It is important to remember that the crews of the ferries live ashore and not on board the vessels. Therefore, in the event of an emergency requiring assistance from mainland fire tenders, 24-hour cover is not available. The island's fire service therefore has to be self-sufficient. We have a total of 16 operational appliances at 10 fire stations and two in reserve. Of those 10 stations, only one of them is staffed by full-time firemen; all the rest are part-time volunteers or "retained men" as they are known. That situation has remained roughly the same since 1948.
As I have already stated, a succession of inspections by Her Majesty's inspectorate of fire services, a Home Office appointment, have all found that the level of appliances and personnel per 1,000 of the population on the Isle of Wight is higher than any other on the mainland. They have, however, all warned the island that the number of personnel, appliances and stations cannot be reduced because of the isolation of the island. Indeed, the inspectorate sat in on the meeting with Lord Ferrers and fully supported the claim that the island's fire service was the minimum acceptable. In 1988–89, the Minister of State, Home Office and Her Majesty's chief inspector of fire services confirmed that view in writing. It was repeated again in 1992 and 1993 by Her Majesty's inspectors.
Mr. David Evans: Can my hon. Friend confirm that we are talking about 120,000 people on the island?
Mr. Field: We are talking about nearly 130,000 people, who are served by just 10 fire stations, one of which is full time. We also get more than 2 million visitors a year, so the population is even larger at the height of our holiday season.
The best illustration I can give to the Minister is that, as he knows, the island is about the size, both in population and in geographical terms, of an average district council. If we were part of a county on the mainland, our 10 stations would be reduced by between five and seven, allowing for the mutual assistance that is available to mainland fire services, as required under section 2 of the 1947 Act.
The problem does not stop there. Because of its dislocation by sea, the island has to have its own pool of specialist vehicles, which are exceptionally expensive—an hydraulic platform appliance costs more than £100,000. A community of the island's size and particular architecture would never normally warrant such expenditure, let alone operational requirement.
Throughout the centuries, and because of the position of the Isle of Wight, its people have been content with their historical role as the first line of defence of England's liberty whether from the unwashed hordes of Napoleon or the satanic ranks of Hitler's legions. We are very resentful of the fact that we have been up-anchored and positioned in Whitehall between the Home Office and the Department of the Environment. We have watched with increasing frustration as the pin-stripe warriors battle it out over our island's fire service. One says it is only just big enough while the other says it is costing too much. It really is the original good game played slowly. I even discussed whether we should approach Sir Robin Butler to see whether he would act as the island's umpire in this

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Gilbertian campaign, but I was counselled to stay my hand. "Wait" said the island sages, "wait for the arrival at the Department of the Environment of the hon. Member for Hertfordshire, West (Mr. Jones)." I did and tonight I have great expectations that I may finally close the file opened by Mark Woodnutt 32 years ago. If I am correct in my expectations, I am sure that the Minister will not feel inhibited by recent revelations in accepting the second prize of two weeks' holiday on the Isle of Wight, for he will be the hero of Vectis.
The Isle of Wight has become rather anecdotal in the House and, to some, I am the epitome of that article in "The House Magazine" that interpreted Back-Bench speak. It said that, "So and so is a good constituency Member," really means that he can talk of nothing else.
When the Prime Minister mentioned the "action thing" in his speech the other day, it struck a chord with me. For far too long, the islanders had been fed the "vision thing" and, in 1987, I promised them and myself tat I would devote my time to correcting those anomalies. Next year, we shall have a unitary authority, thanks to the "action thing".
I hope that one day soon I can debate human rights in China, the abolition of child benefit and the Christmas bonus for higher rate taxpayers, the failure of the doctrine of universality in the benefit system, the abolition of vehicle and television licences and light dues, and the publication of coroners' reports in the same way as I now debate the publication of maritime accident reports. All those and many more subjects are dear to my heart, but so, too, is the Isle of Wight and until I have dealt with its problems and obtained the action, I cannot launch myself upon the vision.
I hope that tonight my hon. Friend will put the final brick on the chimney so that together we may top out the country's first unitary authority and I and the House may be released from my monotone culture.
10.11 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Robert B. Jones): My hon. Friend the Member for Isle of Wight (Mr. Field) began by tempting me to look back over the history books and find a record equivalent to that of him and his predecessors. It does not require that to tempt me to the Isle of Wight, as the climate and hospitality of his constituents are enough to make me visit it anyway. Just in case he thinks that it is a record, when I looked back at the history books on my constituency, I found that, since the 1930s, my predecessors have been campaigning for a bypass for the town of Berkhamsted. But there is some hope for my hon. Friend because that bypass was opened recently, so there is sometimes a happy ending to the story.
I welcome this debate on the standard spending assessments for the new Isle of Wight council and the opportunity that it provides to address the issues that my hon. Friend has highlighted this evening and put to us on other occasions. I pay tribute at the outset to his tireless efforts on behalf of the island's interests. Few hon. Members fight as hard as my hon. Friend, and he deserves success for persistence, if nothing else. Indeed, my hon. Friend the Minister for Local Government will meet my hon. Friend tomorrow, when he leads a delegation from the island, no doubt to re-emphasise the points made tonight.
My hon. Friend will be aware, from his work on the Environment Select Committee and his close interest in the subject, that SSAs are calculated on a common basis for all
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authorities that provide the same services. He may also know that we put considerable efforts into getting the right methodology to deliver SSAs that properly reflect the needs for local authority spending.
Our efforts to get the right methodology involve a dialogue with local authority associations and a full examination of both the options for change and their consequences. Between March and September, officials from my Department met representatives from local authority associations and other Departments to look at technical issues and options for improvements to the current SSA methodology.
Ministers are currently considering a report on the options for changes that this group has examined. Thirty-five possible changes in SSAs have been exemplified, together with a further 12 options on the police SSA. The local authority associations have received copies of this report and we have received many subsequent representations and comments about the various options before us.
We are looking closely at all the possible changes, the impact that those changes would have and the views that we have received. I cannot say tonight what conclusions we shall reach on those options, but the Secretary of State will announce our proposals for 1995–96 SSAs shortly after the Budget. At about the same time, local authorities will be told the technical basis for those proposals. However, I can tell my hon. Friend that our decisions will not change our aim of fairness and consistency in the methodology.
We have considered whether the change to a unitary authority has implications for SSAs. The change to a unitary authority for the Isle of Wight will improve the co-ordination of services, but we also believe that it will help to reduce the bureaucracy and running costs that eat away at the funds that the Government and local council tax payers make available for delivering local services. The Isle of Wight will be treated no more or less favourably because of its unitary status. We expect gains in efficiency in the delivery of services as a result of the new arrangements. They will give the local authority the scope to improve local services or to reduce the burden on the local council tax payer.
We recognise that there may be transitional costs, but those will be met by borrowing and will be repaid out of the savings arising in the longer term. A change to a unitary authority does not change the underlying need for the local authority to spend.
It may reassure my hon. Friend that we have calculated what SSA would have gone to a unitary Isle of Wight, had reorganisation happened on 1 April this year. The results show that there would have been only a minimal difference in the SSA for the island as a whole. We have shared the figures with the authorities on the island. The SSA for the new Isle of Wight authority will be calculated in the same way as for other authorities with responsibility for the same services. The SSA will not be calculated by simply aggregating SSAs for the county and the two districts. Details of the calculations will be available when the provisional settlement announcement is made.
The Department will specify, as part of the settlement package, a "notional amount" for the new Isle of Wight council. That will be used as the base position for the operation of the capping regime for the year immediately following reorganisation. In essence, the notional amount will be the sum of the budgets set by the three island

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authorities for 1994–95, but police service spending will be removed, since that will become the responsibility of the newly formed Hampshire police authority in 1995–96.
My hon. Friend emphasises that the Isle of Wight is unique, and so it is, but my hon. Friend and his family have had a long involvement with local authorities. He knows that every local authority would say that it is unique. Each argues its special circumstances strongly whenever that might win the area a larger share of what is available. There is nothing wrong with that.
However, the total available each year for SSAs is fixed. If one area is given more, the others must have less, so we must ensure that our decisions about SSAs are as objective and fair as they can be. We examine the case for new factors to be taken into account, but new factors cannot always be considered one by one.
Any change in the SSA formula is bound to be scrutinised closely by individual authorities. They will not only wish to probe the justification for the change, but to ask themselves whether our latest change could be prayed in support of making some other change to the formula, from which they would benefit. Therefore, we sometimes have to ask ourselves: if it would be right to make one change, ought we to make others as well, if we are to be fair as between authorities?
However, changes often bring complexity, and we are worried about the complexity of the SSA formulae. My hon. Friend will remember the predecessors of standard spending assessments—the grant-related expenditure assessments. One of the factors in their downfall was their complexity. One of the benefits that we sought, when we introduced SSAs in 1990, was a more understandable system. We are continually trying to balance the arguments for refinement of the formula, with the attendant increase in complexity, against the original wishes to keep the formulae reasonably straightforward.
I acknowledge that there are long-standing contentions that the island is confronted by greater costs on account of being cut off from the mainland. Parallels have been drawn with the Isles of Scilly. The case for increasing resources for the Isle of Wight due to its island nature is still a matter of debate. Other authorities may also feel that they suffer, in other ways, from poor accessibility. The Isle of Wight cannot be compared with the Isles of Scilly. I note, for example, that the Isle of Wight has 60 times the population of the Isles of Scilly, and we should also bear in mind the fact that the Isle of Wight is far closer to the mainland than the Isles of Scilly.
I recognise, however, that there are different circumstances on the Isle of Wight compared with local authorities on the mainland. For example, none of the roads on the island is maintained by the Department of Transport. However, the SSA formula takes full account of all the roads for which a local authority has responsibility. The Isle of Wight, therefore, receives full recognition of that responsibility.
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I also wonder whether the island benefits from some lower costs, too, as a result of its separation from the mainland. For example, it gets the same percentage allowance for higher labour costs as Hampshire, but are rates of pay on the island as high as on the mainland? Even without any other special allowance for being an island, the Isle of Wight has done well on SSAs in recent years.
For instance, the Isle of Wight had an increase in SSA of almost 3 per cent. this year. That is well above the average for England of 1.8 per cent., and above the average for shire areas as a whole of 2.5 per cent. South Wight gained 13.7 per cent. Those changes mean that the Isle of Wight area received an increase in revenue support grant of £2.73 million in 1994–95. I also note that the Isle of Wight county council this year has an SSA per head 10 per cent. greater than Hampshire county council or West Sussex county council and 15 per cent. greater than Dorset county council.
My hon. Friend has raised specific, detailed SSA worries this evening and on other occasions. I recognise his concern about the SSA for the fire service, where actual expenditure by the Isle of Wight authorities is significantly higher than that provided for by the SSA. As my hon. Friend knows, Home Office colleagues also understand that concern.
A number of authorities have suggested that the formula for the fire SSA should be reconsidered. Our proposals for changes in SSA will be announced very shortly after the Budget. But I can say now that we have been considering closely ways in which the formula might reflect the way in which the coastline makes it more difficult for brigades to obtain reinforcements—a point made by my hon. Friend.
The area cost adjustment has similarly been considered by the technical group. We are concerned to find a more robust basis for the taper of the adjustment outside London. A number of possibilities have been considered, including the use of more detailed data on employees' earnings or an approach based on distance from London. We will, as always, consider carefully all the evidence about the robustness and fairness of changes, including the points submitted by the Isle of Wight, before announcing our proposals for consultation.
The transition to community care has also, I know, been a matter of concern to the island. For all authorities, we provided a special transitional grant for 1993–94 to assist in the transition from the previous arrangements. Since those previous arrangements were based on income support, the transition was based partly on income support data. But that was always intended as a temporary feature of the grant. We now base the grant on the same factors as the relevant part of the SSA formula for social services. I realise that the income support data were more beneficial to the island, but I do not think that we could justify continuing their use.
My hon. Friend has very properly raised points about the standard spending assessment for the Isle of Wight. We are very willing to consider such concerns. We will give full weight to what he has said this evening. I am sure that he, and those in his delegation, will make the points in more detail when they visit us in the Department tomorrow. We wish the Isle of Wight success in its transition to a unitary authority.
Question put and agreed to.
Adjourned accordingly at twenty-two minutes past Ten o'clock.